If you’re over the age of 16 and you’re an employee earning over a certain amount you’ll probably have to pay National Insurance contributions. You’ll also have to pay National Insurance if you’re self-employed and make a profit over a certain amount. The amounts change, depending on what rate the government determines for each tax year.
Paying National Insurance helps build your entitlement to state benefits, such as Statutory Sick Pay, Maternity Allowance, NHS healthcare and the State Pension. To qualify for the State Pension, though, you’ll usually have to pay National Insurance contributions for a certain number of years.
National Insurance can be a difficult subject to wrap your head around. In this article, we’ll explain everything in more detail, to help clear up some of the questions you may have about paying it, and give you an idea of how much you might have to pay.
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How much National Insurance do I pay?
How much National Insurance you have to pay depends on what kind of National Insurance you’re paying, which is determined by several factors, including your employment status, age, level of earnings and residence status.
To find out exactly how much National Insurance you can expect to pay, you can use an online calculator, which will give you a breakdown of your monthly Income Tax and National Insurance contributions, based on your annual salary.
Read on to find out more about National Insurance and how it’s calculated.
How do I calculate my National Insurance contributions?
How much National Insurance you have to pay depends on what kind of National Insurance you’re paying.
The four main classes of National Insurance are:
- Class 1 — For the tax year 2022/23, employees under the State Pension Age who earn more than £190 per week will have their National Insurance contributions automatically deducted by their employer. The rate is 13.25 per cent of earnings up to £967 per week, reducing to 3.25 per cent on earnings over £967 per week. (Note that this £190 per week threshold will increase to £242 per week on 6th July 2022, meaning you’ll be able to keep more of your money without paying National Insurance.) 1A or 1B National Insurance contributions are paid by employers directly on their employees’ benefits or expenses.
- Class 2 — Self-employed people making a profit of more than £6,725 per year have to pay a fixed weekly amount of £3.15 for the tax year 2022/23. If your profits are below the Small Profits Threshold (currently set at £6,725), you don’t have to pay Class 2 National Insurance.
- Class 3 — You may not be required to pay national insurance, but you can choose to make voluntary Class 3 contributions to fill or prevent the gaps in your National Insurance record that could affect your entitlement to the state pension. You can check your National Insurance record on the government website, to see whether you’re eligible to make Class 3 contributions.
- Class 4 — For the tax year 2022/23, if you’re self-employed and earn profits of £9,881 or more per year, you must pay Class 4 National Insurance. The rate is 10.25 per cent on annual profits between £9,881 and £50,270 and 3.25 per cent on profits more than £50,270.
What if I have more than one job?
As well as paying Income Tax on a second job, you may also have to pay National Insurance on your second job — but the way in which it works is different.
With Income Tax, there’s a single tax-free amount available for each person each tax year. This is called your Personal Allowance. Whereas, National Insurance is applied to each of your jobs individually (provided they’re with different employers), instead of your total income. This means each job has the full lower threshold, but you might have to pay National Insurance contributions on each job.
If you have two jobs with the same employer (or associated employers), your earnings will be added together for National Insurance purposes.
What if I’m both employed and self-employed?
If you’re employed and self-employed, you will need to pay Class 1 National Insurance on your employed income and Class 2 or Class 4 National Insurance on your self-employed income.
However, if you’re both employed and self-employed, it’s important to know that there’s an annual maximum to what you have to pay in contributions. This means that if you’ve paid sufficient Class 1 National Insurance, you may not need to pay the full Class 2 or Class 4 National Insurance contributions.
Why were National Insurance rates increased for the tax year 2022/23?
In the tax year 2021/22, National Insurance rates were 12 per cent and two per cent. However, for the 2022/23 tax year, the government increased the rate of National Insurance by 1.25 per cent, bringing the rates to 13.25 per cent and 3.25 per cent.
The reason for this is to cover the cost of health and social care, as a result of the COVID-19 pandemic.
Are there any exemptions to paying National Insurance?
People under 16 years of age don’t have to pay National Insurance contributions and you stop paying Class 1 and Class 2 National Insurance when you reach the State Pension Age. You stop paying Class 4 contributions from 6th April, after you’ve reached the State Pension Age.
Certain self-employed people don’t have to pay National Insurance contributions either. These include:
- Examiners, invigilators and moderators
- People who make investments without receiving a commission or fee
- Religious ministers, provided they don’t receive a salary or stipend
If you are a married woman who opted into the Reduced Rate Scheme before April 1977, you won’t be required to pay Class 2 National Insurance, and there are also separate rules that apply to voluntary development workers and share fishermen.
How is National Insurance paid?
If you’re an employee on a Pay As You Earn (PAYE) payroll system, your National Insurance contributions will be taken automatically, so you won’t need to do anything. When your payments are taken depends on how often you get paid. This could be weekly, monthly or in a different time period.
If you’re self-employed, you’ll need to organise your payments via your Self Assessment tax return.
Summary
If you’re over the age of 16 and you earn over a certain amount, it’s likely you’ll have to pay National Insurance contributions.
Paying National Insurance helps build your entitlement to state benefits, such as Statutory Sick Pay, Maternity Allowance, NHS healthcare and the State Pension.
How much National Insurance you have to pay depends on the type of contributions you’re paying. The four main classes of National Insurance are Class 1, Class 2, Class 3 and Class 4. If you have two jobs, you will have to pay National Insurance for each job.
For the 2022/23 tax year, the government increased the rate of National Insurance by 1.25 per cent to cover the cost of health and social care, as a result of the COVID-19 pandemic.
You may be exempt from paying National Insurance if you’re under the age of 16, you’ve reached the State Pension Age, you’re self-employed in certain roles, or you’re a married woman who opted into the Reduced Rate Scheme before April 1977. There are also separate rules that apply to voluntary development workers and share fishermen.
If you’re an employee on a payroll system, your National Insurance contributions will be taken automatically, but if you’re self-employed, you’ll need to organise your payments via your Self Assessment tax return.
