National Insurance - An overview | NatWest

 

 

 

National Insurance - An overview

If you work or claim benefits in the UK, you’ll have a National Insurance number. Allocated to you when you turn 16, your National Insurance number follows you throughout your financial life, to make sure everything from your ISA allowance to all your student loan repayments are linked to you alone.

Generally if you earn over £157 a week (£8,164 a year), regardless of whether you're an employee or self-employed, you'll have to contribute to National Insurance throughout your working life. This entitles you to further benefits as and when you need them, like a State Pension, Jobseeker's Allowance and Child Benefit. To get the full State Pension when you retire, you'll need to have clocked up 30 years' worth of National Insurance contributions - or 35 years from April 2017 onwards.

How much is National Insurance?

There are four different classifications for National Insurance, each depending on your working status:

Class 1

If you're employed by a company, you'll pay 12% of everything you earn over the £157 a week threshold on National Insurance. This will be taken out of your salary automatically, so you'll see it in the 'deductions' column of your payslip.

 

As an example, if you earn £250 a week, you'd pay nothing on the first £157 and 12% on the remaining £93. That would make your weekly National Insurance contribution £11.16.

 

If you make over £866 a week (£45,032 a year), you're considered a 'higher earner'. That means you will pay the basic rate of 12% on your earnings between £157  to £866 per week (being the Upper Earnings Limit) , and any earnings in excess of the Upper Earnings Limit will be subject to National Insurance at the upper rate of 2%.

Class 2

If you're self-employed, you'll pay a flat rate of £2.85 a week. You can opt out of this payment if you can prove that you earn below £6,025. Class 2 National Insurance are expected to be abolished from 6 April 2018.

Class 3

If you live abroad, you're unemployed or you aren't earning over the basic threshold, you can still make a voluntary contribution for National Insurance. That should make sure you're still eligible for the full State Pension when you retire.

Class 4

As well as their Class 2 contribution, self-employed workers also have to pay an extra 9% on all profits earned between £8,164 and £45,000. Anything earned over £45,000 will have an additional 2% tax.

The information contained on this webpage is based on our understanding of UK tax legislation and HMRC Interpretation. The contents of this webpage do not constitute tax advice and are meant as a general guide only. If you are unsure of your tax obligations or responsibilities you are recommended to seek professional tax advice. Tax reliefs referred to are those applying under current legislation, which may change. The availability and value of any tax reliefs will depend on your individual circumstances.

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