National Insurance: a summary

National Insurance (NI) was introduced as a way of funding Social Security Benefits. It is payable by workers and by their employers. Payment of National Insurance gives rights to certain benefits such as state pension. Different classes of National Insurance can give different benefit rights. In particular Class 1 National Insurance, the type paid by employees, gives the right to contributions based benefits which are not means tested. For information about benefits, see https://www.gov.uk/browse/benefits, or visit your local Citizens Advice Bureau (www.citizensadvice.org.uk).

There are four main types (or ‘classes’) of National Insurance: Class 1 is payable by employees and employers, Class 2 is a flat rate payable by the self-employed, Class 3 is voluntary contributions paid by people who want to complete their National Insurance record for benefit purposes, but are not otherwise liable to pay National Insurance, and Class 4, which payable on profits above a set level by the self-employed.

National Insurance, unlike income tax, is only payable by people who are 16 or over and under the state pension retirement age. Prior to 2010, the state pension retirement age was set at 60 for women and 65 for men. Since then, pension age has been rising for both men and women. For more information from the Gov.uk see https://www.gov.uk/calculate-state-pension .

The 2022 Spring Statement set out increases in the thresholds for paying national insurance that are being brought into line with the tax free personal allowance. In 2022/23 only, the Health and Social Care Levy will be charged via a temporary increase in class 1 and 4 NIC of 1.25%.

Further information about National Insurance can be found on the HMRC website pages here.