What is National Insurance?

In a nutshell

National Insurance is a form of tax on earnings paid by employees and employers to fund the welfare system in the UK. Things like:

• State pension
• NHS
• Benefits – housing, jobseeker’s allowance, Universal Credit
• Disability benefits
• Maternity allowance
• And so on…

Who pays National Insurance?

• 16+ year-olds who are either
  • 1. An employee earning £242+/week, or
  • 2. Self-employed and making a profit of £12,570+/month
• Company directors

When do you stop paying?

When you reach the State Pension age (66 right now).

How much do you pay?

How much you pay depends on how much you earn:

Your pay	Class 1 National Insurance rate
£242 to £967 a week (£1,048 to £4,189 a month)	12%
Over £967 a week (£4,189 a month)	2%
You’re a company director	Different rules (🎵)

How do you pay it?

If you’re an employee, your National Insurance Contributions (NICs) are taken automatically from your wages.

If you’re a LTD company director or self-employed, your NICs are assesed on an annual basis rather than taken automatically from each payslip.

Sources

• National Insurance: introduction – Gov.uk