What is National Insurance?
It is effectively a tax on the money you earn whether you are an employee or self-employed. You pay National Insurance contributions to qualify for State Pension and certain benefits such as maternity pay. At the age of 16 you will receive a National Insurance number from HMRC and this will remain your number for the rest of your life.
Who pays National Insurance?
You pay National Insurance if you are 16 or over and are either:
- an employee earning above £242 a week
- self employed and making a profit of more than £12,570 a year
You do not pay National Insurance, but still qualify for certain benefits and the State Pension, if you are either:
- an employee earning between £123 and £242 a week
- self-employed and your profits are between £6,725 and £12,570 a year
Your contributions are treated as having been paid to protect your National Insurance record.
What are the different classes of National Insurance?
Class 1 – Employees earning more than £242 and under State Pension age – they are automatically deducted by your employer
Class 2 – Self-employed people earning profits of £12,570 or more a year. If your profits are less than £6,725 a year, you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record
Class 3 – Voluntary contributions you can pay to fill or avoid gaps in your National Insurance record
Class 4 – Self-employed people earning profits of £12,570 or more a year – your contributions will be calculated when you complete your self-assessment tax return and you pay the contributions at the same time as paying your tax.
How can I check my National Insurance contributions?
To check your contributions go to https://www.gov.uk/check-national-insurance-record you will need your government gateway login details to access your record. Once logged in you will see what you have paid, up to the start of the current tax year, any NI credits you have received, if there are gaps in contributions or credits, which mean some years will not count towards your State Pension and if you can pay voluntary contributions to fill any gaps (usually you can pay a shortfall for the last 6 years) and how much this will cost.
If you require any help or information regarding the above please get in touch with us on 01271 375271/01237 471881
