National Insurance Thresholds
National insurance for employees and employers
The amount of National Insurance you pay depends on how much you are paid each payday. This is different from income tax. Income tax uses an annual limit for each tax year. For National Insurance, your pay is compared to a number of different ‘limits’ to see how much National Insurance you pay. If you are normally paid weekly, then a weekly limit is used. If you are normally paid monthly, then a monthly limit is used. For simplicity, we use weekly limits in our examples. The main limits are:
a) The Lower Earning Limit (or LEL)
If you earn between the Lower Earning Limit and the Primary Threshold you will get National Insurance ‘credits’ – that is you will be entitled to some basic National Insurance benefits, but won’t actually pay any National Insurance. These limits are respectively £112 and £155 per week for 2016/17 (and 2015/16).
Example: During 2016/17, Lottie earns £96 per week in one job and £115 per week in a second job. Neither Lottie nor her employers pay National Insurance. But because her earnings are over £112 per week in the second job, Lottie will gain basic state benefit rights from this second job.
b) The Primary Threshold (sometimes called the Primary Earnings Threshold)
If you earn between the Primary Threshold and the Upper Earnings Limit, then you will pay the standard rate of National Insurance (12% in 2016/17 and 2015/16) on your earnings over the Primary Threshold. The Primary Threshold is £155 per week in 2016/17 (and 2015-16). The Upper Earning Limit is £827 per week for 2016/17 and £815 per week in 2015-16.
E.g. John earns £190 in one week in July 2016. He pays no National Insurance on the first £155 and 12% on the next £35. (That is £4.20).
c) The Secondary Threshold (sometimes called the Secondary Earnings Threshold)
If you earn over the Secondary Earnings Threshold then your employer will pay the standard rate of employer’s National Insurance on these earnings (13.8% in 2016/17 and 2015/16). This limit is £156 per week in 2016/17 (and 2015-16). This is in addition to the employee’s contributions (which are due on earnings over the Primary Threshold of £155 per week).
E.g. John earns £190 in one week in July 2016. He pays £4.20 in National Insurance on his earnings over £155 (as above). His employer also pays 13.8% on the earnings over £156 per week, that is on £34 – a sum of £4.69.
d) The Upper Earnings Limit (or UEL)
(£827 per week for 2016-17 and £815 for 2015-16). For high earners who are paid over the Upper Earnings Limit, the National Insurance rate falls. On earnings above this limit, the employee pays a lower rate of 2% in 2016/17 (and 2015-16). The employer continues to pay the standard rate of employer’s National Insurance on these earnings (13.8% in 2016/17 and 2015-16).
E.g. Alison earns £950 in one job in week during August 2016. She pays 12% National Insurance on her earnings between £155 per week and £827 per week. In addition, she pays 2% National Insurance on her earnings over £827 per week. Her total National Insurance is £950 – 827 = £123 at 2% = £2.46; plus £827 – 155 = £672 at 12% = £80.64; a total of £83.10.
e) Lower Earnings Limit
If your earnings in any job are less than the Lower Earnings Limit (£112 per week for 2016/17 and 2015-16), then you will pay no National Insurance and you will earn no National Insurance benefit rights.
As state pension age rises, check your employer knows the right date to stop your National Insurance deductions.