National Insurance (NIC)

National Insurance was introduced in 1911 as an insurance against illness and unemployment. It was later extended to incorporate retirement pensions and other benefits.

National Insurance is payable if you’re 16 or over and under the State Pension Age, an employee earning above £157 a week or self-employed and making a profit of £6,025 or more a year.

There are six different types (classes) of National Insurance called Class 1, 1A, 1B, 2, 3 or 4 National Insurance.

  • Class 1 is payable by employees earning more than £157 a week and under State Pension age. This is automatically deducted by your employer.
  • Class 1A contributions are paid by your employer on benefits in kind - for example, a company car.
  • Class 1B contributions are paid by your employer on entertaining expenses above a minimum allowable level. The employer pays these rather than taxing you on the benefits.
  • Class 2 is payable by the self-employed. You don’t have to pay this if you earn less than £6,025 a year but you can choose to pay what are called voluntary contributions in order to keep your entitlement to certain benefits such as the state pension.
  • Class 3 are voluntary contributions which you can pay to fill or avoid gaps in your National Insurance record.
  • Class 4 is payable by the self-employed with profits over £8,164 a year.

National Insurance Rates 2017/2018

National Insurance rates are extremely complicated because of different categories for eligibility. We have listed the national insurance rates for most employees in full time education aged over 21 and below state pension age (married women and widows are entitled to pay reduced national insurance and are not included).

A complete breakdown is available from:

 https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions.

National Insurance rates

  £11 - £157 pw
£5,824 - £8,600 pa
£157.01 - £866 pw
£8,060 - £43,000 pa
£770 - £815 pw
£40,040 - £42,380 pa
Over £866 pw
£43,000 pa
EmployeeNil12%12%2%
EmployerNil13.8%13.8%13.8%

There are different employer contribution rates for employees under 21.

Class 1A and Class 1B rates
The rate paid by employers on class 1A and 1B national insurance is 13.8%.

Class 2 Rates
For 2017/18 the rate is £2.80 per week or £145.60 pa.

Class 3 Rates
For 2017/18 the rate is £14.25 per week or £741 pa. This is a voluntary rate for this tax year.

If you are plugging gaps in your NIC record for previous tax years you will pay a different rate. For tax years from 2006/07 - 2012/13 the rate is £13.25 pw, 2013/14 is £13.55 pw, 2014/15 is £13.90 pw. 2016/17 is 14.10 pw

Class 4 Rates
For 2017/18 the rate is 9% on profits between £8164 and £45,000 and 2% on profits over £45,000.

Also see

Corporation Tax Benefits in Kind Personal Allowance

State Retirement Date

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