What is National Insurance?
National Insurance contributions (NICs) are a tax on earnings paid by the UK public. National Insurance qualifies you for benefits, including your state pension and certain support allowances.
National Insurance is broken down into different ‘classes’. The class you pay depends on your employment status:
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employees earning more than £242 a week (£190 a week from 6 April 2022 to 5 July 2022) and under the state pension age pay Class 1 contributions, which are deducted by the employer
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self-employed people pay National Insurance in two classes, Class 2 and Class 4 (with a few exceptions)
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if you employ people, you pay secondary Class 1 contributions on your employees’ earnings
How do I pay National Insurance?
Most self-employed people pay National Insurance through their annual Self Assessment tax return. The deadline to file your return and pay your bill is 31 January each year.
This means you pay National Insurance in arrears. We list the rates and thresholds for both the current and the previous tax year below.
Some self-employed people might pay National Insurance differently:
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you won’t pay NICs if you’re under 16, or over the state pension age (unless you pay Class 4 NICs, which you stop paying at the end of the tax year in which you reach state pension age)
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you won’t have to pay Class 2 NICs if you’re a married woman who opted into the Reduced Rate scheme before it ended in April 1977
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separate rules apply to share fishermen and volunteer development workers
Some self-employed people don’t pay National Insurance contributions through Self Assessment, but they may choose to make voluntary contributions. These workers include:
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examiners, moderators, and invigilators
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religious ministers, providing that they receive no salary or stipend
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people who make investments, but without receiving a commission or fee, and not as a business
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some people whose business involves land or property
Self-employed National Insurance rates
Class 2 and Class 4 National Insurance is charged at different rates.
Class 2 National Insurance contributions are fixed at £3.15 a week and it’s only charged if your annual profits are £6,725 or more.
Class 4 National Insurance contributions are only charged if your profits are above £11,908 a year.
The rate is 10.25 per cent on profits between £11,908 and £50,270 and 3.25 per cent on profits over £50,270.
What is Class 2 National Insurance?
|
Class 2 NICs |
2022-23 |
2021-22 |
|---|---|---|
|
Small profits threshold |
£6,725 |
£6,515 |
|
Weekly rate |
£3.15 |
£3.05 |
What is Class 4 National Insurance?
|
Class 4 NICs |
2022-23 |
2021-22 |
|---|---|---|
|
Self-employed people start paying above |
£11,908 |
£9,568 |
|
A lower rate above |
£50,270 |
£50,270 |
|
Initial rate |
10.25% |
9% |
|
Rate above £50,000 |
3.25% |
2% |
The government has increased National Insurance by 1.25 percentage points in 2022-23, to help pay for health and social care.
Voluntary National Insurance self-employed contributions
You can choose to make voluntary National Insurance contributions. You might do this if there are gaps in your National Insurance record that could affect your entitlement to the state pension, or if you had small profits during periods of self-employment.
If you’re concerned that there may be gaps in your National Insurance record, you should ask for a copy using the gov.uk tool. You can then check whether you’re eligible to make voluntary contributions.
What National Insurance contributions do employers make?
On behalf of your employees, you deduct 13.25 per cent from their pay on earnings between the primary threshold (£1,048 monthly or £242 weekly) and the upper earnings limit (£4,189 monthly or £967 weekly).
You deduct 3.25 per cent on pay above the upper earnings limit.
These are your employees’ Class 1 National Insurance contributions.
Employers pay contributions towards their employees’ National Insurance (these are known as secondary contributions).
For 2022-23, this is at 15.05 per cent above the secondary threshold (which is £758 monthly or £175 weekly).
Make sure you claim the employment allowance, which reduces your annual National Insurance liability by £5,000 a year.
Is there anything more you’d like to know about National Insurance? Let us know in the comments below.