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 2016. He is paid monthly. The first £672 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 £39.36. In addition, the employer will have to pay employer’s National Insurance on Adrian’s earnings over £676 per month charged at 13.8%, that is £44.72.

(If Adrian is aged undr 21, or under 25 in apprenticeship, then the employer will not have to make employer’s contributions; some employers are covered by the Employment Allowance – a credit of up to £3,000 against the employer’s National Insurance cost –  and so may not have to pay employer’s contributions).

Only working people (and their employers) between the ages of 16 and state retirement age have to pay National Insurance.

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.