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If you’re living and working in the UK, you’ll likely have noticed National Insurance contributions (NICs) coming out of your paycheck.
But what are National Insurance payments? What do they pay for? And how do you apply for an NI number in the first place?
Our brief guide to National Insurance is here to help.
What is National Insurance?
National Insurance is a state tax on your earnings and/or self-employed profits. Like income tax, all contributions are paid into a fund to help pay for certain state benefits when individuals need help.
In the UK, you will be charged NICs once you turn 16 and your earned income reaches a certain level. At the moment, this is £242 a week if you are an employee. For self-employed individuals, profits need to be over £11,908 a year.
You must have a National Insurance number before you start paying National Insurance. If you work in the UK, you’re liable to start paying NICs as soon as you start working for your employer. You cannot work in the UK before applying for a National Insurance number.
And once you reach the State Pension age, you don’t need to pay NICs at all.
How do you apply for a National Insurance number?
If you’re a migrant in the UK, you should be allocated a National Insurance number on your biometric residence permit. If you aren’t allocated one this way, you should apply for it as soon as you’re in the UK. This can be done by calling the National Insurance helpline number on 0800 141 2075.
UK nationals will normally receive their NI number and card automatically in the run-up to their 16th birthday. UK nationals under the age of 20 who haven’t received their NI number should call the helpline on 0300 200 3500. If you’re over 20 years old, you should contact the National Insurance application line on 0800 141 2075.
You will need ID and may need to attend an interview in order to obtain your National Insurance number. The office is open Monday to Friday.
You cannot work in the UK before applying for a National Insurance number. Once you’ve applied for it, you can legally work so long as you can prove your right to work in the UK. Once your National Insurance number arrives, you should then make sure that your employer updates their records.
What are the types of National Insurance?
There are six different ‘classes’ of National Insurance contributions, and the type you pay depends on your circumstances. The types of National Insurance are as follows:
- Class 1: If you’re an employee earning more than £242 a week and you’re under the State Pension age, you will be automatically charged Class 1 NICs by your employer.
- Class 1A or 1B: Sometimes employers pay NICs directly on their employee’s expenses or benefits. In this case, the NIC you pay will be Class 1A or 1B.
- Class 2: If you’re self-employed and your profits are £11,908 or more a year, you will need to pay Class 2 contributions.
- Class 3: If you’re self-employed and your annual profits are less than £6,725, you can choose to pay voluntary contributions. This will fill or avoid any gaps in your National Insurance record.
- Class 4: This type of National Insurance applies if you’re self-employed and your annual profits are £11,909 or more.
In the 2022-23 tax year, the Class 1 NIC rate is 12% for earnings between £242 and £967 a week (£1,048.01 to £4,189 a month) and 2% on all earnings over this amount.
Meanwhile, Class 2 payments are £3.15 a week and Class 4 payments are 9.73% on profits between £11,909 and £50,270. Profits over £50,270 are charged at 2.73%.
Why do I need to pay National Insurance?
Paying National Insurance entitles you to some state benefits and you must pay NICs for a set number of years in order to receive the state pension. If you don’t meet the minimum amount of contributions, then you may not be eligible to receive it. Our guide to the UK state pension has more information on this.
In addition to the Basic State Pension, Additional State Pension and New State Pension, National Insurance contributions fund the following benefits:
- Contribution-based Jobseeker’s Allowance
- Contribution-based Employment and Support Allowance
- Maternity Allowance
- Bereavement Support Payment
Class 4 contributions do not usually count towards state benefits.
How do you pay National Insurance?
If you’re in employment, National Insurance will be automatically deducted from your monthly pay.
However, if you’re self-employed, it’s your responsibility to organise the contributions yourself. This is done as part of your annual Self Assessment process with the amount you pay for Class 4 NIC calculated at the end of each year.
You can check your National Insurance record online via the government website. It’s important to keep track of your contributions to see whether there are any gaps or credits.
What happens if I’m sent to work in the UK by an overseas employer?
If you’re employed overseas but are internationally assigned to work in the UK, the applicable rules depend on whether your home country is:
- an EEA country or Switzerland—if this applies to you, the following guide can help
- any country with which the UK has a social security agreement—read this guide if you fit this bill
- any other country that does not fall into either of the above categories—this guide here has more information
If you’re employed in the UK on a local UK contract, then you’re liable to pay UK NIC as soon as you start working. This rule applies regardless of where you are from.
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