National Insurance can be a confusing topic and is something we are often asked about by our clients. To help make things clearer we have provided some general pointers below....
National Insurance Number
In order to pay National Insurance (NI) and ensure the NI and tax you pay are properly recorded against your name, you require a National Insurance (NI) number. Your National Insurance number is your own personal account number, it is unique to you and will not change even if your employment status does. Your NI is a nine digit number made up of a series of letters and numbers which you can find on your payslip, P60 or tax return. If you don't know your National Insurance number, or you need to apply for a NI number, you can call the National Insurance helpline.
Who has to pay National Insurance?
Everyone aged 16 years or over who is either an employee earning above £155 a week, or self-employed and making a profit of over £5,965 a year, has to pay National Insurance. You pay National Insurance to qualify for certain benefits including the State Pension.
Types of National Insurance
There are four different types (classes) of National Insurance. The type you will pay depends on your employment status and how much you earn. Details on the different classes can be found below:
- Class 1 - This is the most common type of National Insurance and is paid by everyone who is employed and earning more than £155 a week. For any earnings between £155 and £815 a week (£672 and £3532 a month) you pay 12% National Insurance. For any earnings over this amount you pay 2%.
- Class 2 - Class 2 National Insurance is paid by individuals who are self-employed and who are earning more than £5,965 a year. If you are eligible to pay Class 4 National Insurance (see below) you will still be required to pay Class 2 National Insurance.
- Class 3 - Class 3 National Insurance are voluntary contributions that can be paid to top up your National Insurance contributions, or to avoid gaps in your National Insurance record.
- Class 4 - Class 4 National Insurance is paid by individuals who are self-employed and who earn a profit of over £8,060 a year. For any earnings between £8,060 and £42,385 you pay 9% National Insurance, for any earnings over this you pay 2%.
How do you pay National Insurance?
If you are employed your employer will deduct National Insurance from your monthly salary before you get paid. Your payslip will show your NI contributions.
If you are self-employed you will pay National Insurance on your 'taxable income' - the profit you make from working for yourself minus any business expenses you incur.
If you are both employed and self-employed your employer will deduct your class 1 NI from your wages, and you will have to pay your class 2 and 4 payments (if applicable) for your self employed work.
What to do if your circumstances change.
It is important that you inform HM Revenue and Customs (HMRC) if any of the following apply:
- Your personal details change (e.g. your name, address or marital status)
- You start or stop being self-employed
If you have any questions about National Insurance and what it means for you then get in touch with us on 020 3757 9290 or email us.