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 £120 and £183 per week for 2020/21.
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 2020/21) on your earnings over the Primary Threshold. The Primary Threshold is £183 per week in 2020/21. The Upper Earning Limit is £962 per week for 2020/21.
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 2020/21). This limit is £169 per week in 2020/21. This is in addition to the employee’s contributions.
d) The Upper Earnings Limit (or UEL)
(£962 per week for 2020/21). 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% .The Employer continues to pay the standard rate of employer’s National Insurance (13.8%) on these earnings.
e) Lower Earnings Limit
If your earnings in any job are less than the Lower Earnings Limit (£120 per week for 2020/21), 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.