PLEASE NOTE: The charity TaxAid advises only those people on low incomes whose problems cannot be resolved with HMRC.

National insurance for employees and employers

National insurance for employees and employers

Employees pay class 1 National Insurance.

Employers are responsible for deducting income tax and National Insurance from employee’s wages. The employer pays the amounts deducted to HMRC each month. National Insurance for employees has two parts: the employee’s National Insurance Contributions – a deduction from gross pay; and employer’s National Insurance Contributions, a cost borne by the employer in addition to the gross pay.

Example: Adrian earns £1,000 in June 2017. He is paid monthly. The first £680 per month he earns is free of National Insurance. Employee’s National Insurance is deducted from his earning over this limit at 12%, this comes to £38.40. In addition, the employer will have to pay employer’s National Insurance on Adrian’s earnings over £680 per month at 13.8%.

(There are different rules for employer contributions if the employee is aged under 21, or under 25 in apprenticeship. Some employers are covered by the Employment Allowance – a credit of up to £3,000 against the employer’s National Insurance costs).

Only working people between the ages of 16 and state retirement age have to pay National Insurance. Employers continue to pay National Insurance after the employee reaches the state retirement age.

TaxAid Tip

The state retirement is rising.  It is important to check the date you become entitled to your state pension and tell your employer if you think National Insurance is being deducted when you are not liable to pay.