What are National Insurance contributions? How can I pay them? Do I have to pay National Insurance contributions? National Insurance contributions are divided into 4 different classes, that employees and self-employed people have to pay. Indeed, contributions may be deducted from your pay, or you may have to make voluntary payments. This Your Benefits article will tell you all you need to know about National Insurance contributions.
Who needs to pay National Insurance contributions?
National Health contributions are payments you can make in order to be eligible for the State Pension, and a number of benefits. You may be over 16 years old. In this case, you may have to pay National Insurance contributions. Indeed, this is the case if one of the following also applies:
- Self-employed people whose profit is equal to or superior to £6,725 yearly;
- Employees who get £190 weekly.
Are you unsure if you are an employee or self-employed? Then, check out Your Benefit’s article on your Employment Status. Indeed, your employment status dictates your rights and what you are entitled to.
Your weekly income may be between £123 and £190. If this is the case, to make sure your National Insurance record does not suffer, your contributions are treated as though already having been made.
If you did not pay enough National Insurance contributions, you may make voluntary National Insurance contributions. Indeed, then, you could fill in gaps in your National Insurance contributions record.
What happens when you stop paying National Insurance?
You may become employed. Once that happens, and you are State Pension age, you do not need to pay Class 1 National Insurance anymore. Furthermore, once you are self-employed, there are a number of contributions you will stop making. More specifically, the following:
- Starting when you are State Pension age: Class 2 National Insurance
- Starting April 6 after being at the State Pension age: Class 4 National Insurance
What is my National Insurance number?
To make National Insurance, you need to have a National Insurance number. Indeed, this is to ensure that the contributions and tax that you pay are registered as having been paid by you. Your NI number will not ever change. It will always stay the same. You may find your NI number on your:
- Personal tax account on your Gov.UK website (in the National Insurance section);
- Post that concerns your benefits, pensions or tax;
Your National Insurance number is unique to you. Because of this: do not share your National Insurance number with anyone that does not need it. If an organisation requests to know your National Insurance number, do not provide it if you believe that they do not need it.
Who will need my National Insurance number?
There are a number of organization that require your National Insurance number. Indeed, they include the following:
- If you have an Individual Savings Account: the provider;
- If you have a stakeholder or personal pension: the provider;
- For those that applied for a student loan: the Student Loan company;
- If you claim Housing Benefit: your local council or the Northern Ireland Housing Executive;
- When you register to be able to vote: Electoral Registration Officers;
- Your employer;
- If you sell and buy derivatives, bonds and shares: the authorized financial service provider that you use;
- Her Majesty’s Revenue and Customs (HMRC);
- If you receive state benefits: either the Department for Work and Pensions (which includes the Pension, Disability and Carers Service and Jobcentre Plus), or, the Department for Social Development if you live in Northern Ireland.
You will often need to prove that your National Insurance number is your own. In order to do this, you can access your Personal tax account (on the Gov.UK) website. From there, you may access and download or print out letters indicating your National Insurance number.
What National Insurance class do I need to pay?
Your National Insurance class depends on how much you earn and on your employment status. Indeed, you may pay Class 1 contributions. This is the case if you are employed and earning more than £190 weekly. Furthermore, you need to be younger than State Pension age. Additionally, your employer subtracts them from your pay.
You may pay Class 1A or 1B. These contributions are subtracted by the employer from your (the employee’s) benefits and expenses.
Then are Class 2 contributions. These are for those who are self-employed. Indeed, you must also get profits equal or superior to £6,725 annually. However, if your profits are inferior to this, you may make voluntary contributions. Indeed, then, you can fill gaps in your record of unpaid National Insurance contributions.
Thirdly are Class 3 contributions. These are purely voluntary. Indeed, they are to avoid holes in National Insurance records. Lastly are Class 4 contributions. These are meant for those who are self-employed and get profits equal to or superior to £9,881 annually.
How much National Insurance do I need to pay?
National Insurance contributions rates can differ. Indeed the National Insurance contribution rates for 2022-2023 increased by 1.25% from 6 April 2022 to 5 April 2023. Indeed, the money that is gotten form this will go towards social, health care and the NHS. It will apply to the following classes:
- Class 4 (contributions made by self-employed people);
- Class 1 (contributions made by employed people);
- 1A and 1B (contributions made by employers);
If you are employed, what you pay depends on how much you earn. The exact amount that you as an employee will need to pay is dependent on your category letter. The National Insurance rates for 2022-2023 for employed people are as follows:
- For those earning between £823 and £4,189 monthly, or £190 and £967 weekly: 13.25%
- For those earning more than £4,189 monthly, or £967 weekly: 3.25%
You may not have to pay the full amount. Indeed, this is the case if the following are true:
- You chose to defer your National Insurance (this may be because you have more than just one job);
- You have a ‘certificate of election’ and are either a widow or married woman.
The way that you pay for your National Insurance contributions as an employee is via your taxes. Indeed, your contributions will be subtracted from your pay before you receive it. Your payslips will indicate the contributions that you have made.
How much do I need to pay if I am self-employed?
If you are self-employed, you have to make Class 4 or Class 2 contributions. Indeed, this depends on how much profit you are able to make. However, note that,via Self-Assessment, many people pay the two kinds.
You may want to avoid holes in your National Insurance contributions record. In this case, you can make voluntary contributions. Indeed, you may want to do this if one of the following applies:
- You have a particular job and do not make Class 2 contributions via Self-Assessment (then, contact HM Revenue and Customs to make voluntary payments);
- Your self-employment profits are fewer than £6,725 annually.
Additionally, you may both be employed and self-employed. Then, you may have to pay both Class 1 and Class 2 and Class 4 National Insurance. Class 1 National Insurance will be subtracted from your wage. Then, for the work you do while being self-employed, you will have to pay Class 2 and Class 4 contributions.
You may wonder how much you have to pay if you are both employed and self-employed. However, it depends on how much you receive in income from both occupation. Indeed, you will need to fill out your Self-Assessment tax return. Then, HM Revenue and Customs will let you know how much you need to pay.
What benefits do contributions count towards?
There are a number of benefits where your National Insurance contributions impact either your eligibility or payment amounts, or both. In fact, they are the following:
|Benefits impacted by National Insurance contributions in 2022
|Class 1 contributions (employees)
|Class 2 contributions (self-employed)
|Class 3 contributions (voluntary contributions)
|Bereavement Support Payment
|Contribution-based Employment and Support Allowance (ESA)
|Contribution-based Jobseeker's Allowance (JSA)
|New State Pension
|Additional State Pension
|Basic State Pension
Note that you may be self-employed. Furthermore, your profits may be more than or equal to £9,881 annually. Then, if you pay Class 4 National Insurance contributions, they will not contribute for your eligibility for state benefits.
You may not be certain of what benefits you are entitled to. If this is the case, Your Benefits can help. Indeed, we provide a free simulator that can show you exactly how much aid you are entitled to. Indeed, it may indicate that you are missing out on benefits you could earn. And again, it’s free!
What if I don’t work or my circumstances change?
If you do not work, this could impact that you receive. Indeed, this is likely the case if there are holes in your National Insurance contributions record. However, you may have a good reason for not being able to pay National Insurance contributions.
In fact, you could be caring for an individual, or are sick and unable to work. If this is the case, you could receive National Insurance credits. If you are unable to receive credits, you may still make voluntary contributions.
Your circumstances change. Then, you must notify HM Revenue and Customs (HMRC). Indeed, this may include the following:
- Beginning to or ceasing to be self-employed;
- A change in personal information, such as your marital status, your home address or first or last name.