National Insurance contributions

If you are aged 16 to state pension age, you are liable to pay National Insurance. Your employer will deduct National Insurance contributions (NIC) from your pay, as well as income tax. National Insurance is not due on all your earnings. You are allowed to earn some money without paying National Insurance as an employee. National Insurance contributions entitle you to certain benefits (like a non-means tested level of Jobseekers allowance). They also count towards the state retirement pension. From 6 April 2011, the state pension age is rising, so it is important to know your expected retirment date and check that you are not charged National Insurance beyond this date  – if you are, you can ask for a refund (see National Insurance section – refunds).

If your earnings are between £102 and £139 per week for 2011-2012, you are treated as if you had made National Insurance contributions, but you don’t actually have to pay National Insurance. At higher levels of earnings, (above £139 but less than £817), you pay National insurance at a fixed percentage on your earnings (12%). For earnings above this level, you pay a small National Insurance charge (2% in 2011/12) on the additional earnings.

More than one employment

If you have more than one employment, NIC is calculated separately for each job.  It is therefore possible to have total earnings above the NIC threshold of £139 per week, but because you receive less than this amount for each job, no NIC will be due. If this is the case you may want to consider making voluntary NIC payments to retain your right to contribution based state benefits and the state pension.

On the other hand, if your total pay from two or more jobs is above the top threshold of £817 per week you may find that you are paying too much NIC at the 12% rate.  If this is the case you can ask for a refund of overpaid NIC by writing to HMRC at the end of the tax year enclosing copies of your forms P60s. Also, in some circumstances (and if you know in advance) you can ask HMRC to instruct secondary employers to withhold NIC only at 2%.

Married women’s reduced rate election

Some married women and widows made an election (before May 1977) to pay a reduced rate of National Insurance of 5.85%. If you made this election it is important to check that it is still appropriate. See the National Insurance section reduced rate election for more details.