National Insurance: What You Pay
National Insurance is a compulsory contribution system in the UK that funds state benefits including the State Pension, NHS, unemployment benefits, and maternity pay. Unlike Income Tax which goes into general taxation, National Insurance contributions (NICs) are specifically earmarked for welfare and healthcare services. Understanding how much you pay, what it funds, and how it affects your benefits is essential for all UK workers. National Insurance rates have remained relatively stable, with employed workers paying 12% on most earnings and 2% on higher earnings. Let's break down exactly what you'll pay in 2025 and what you receive in return.
The National Insurance system has different classes depending on employment status - Class 1 for employees, Class 2 and Class 4 for self-employed, and Class 3 for voluntary contributions. Most working people pay Class 1 NICs automatically through PAYE alongside Income Tax. The threshold and rates are set annually by the government and usually increase in line with inflation.
How Much is National Insurance in the UK?
National Insurance contributions vary based on your earnings and employment status. Here are the current rates for 2025:
Class 1 (Employees) - Main Rate: 12% on earnings between £12,570 and £50,270 per year. On a £30,000 salary, you pay £2,091 in National Insurance annually (£174/month).
Class 1 (Employees) - Additional Rate: 2% on all earnings above £50,270 per year. On a £70,000 salary, you pay £4,915 in National Insurance annually (£410/month).
Class 1 (Employers): 13.8% on employee earnings above £9,100 per year. This is paid by employers, not deducted from your salary, but affects total employment costs.
Class 2 (Self-Employed): £3.45 per week (£179 per year) for profits over £12,570. Provides access to State Pension and some benefits.
Class 4 (Self-Employed): 9% on profits between £12,570 and £50,270, then 2% on profits above £50,270. On £40,000 profit, you pay £2,469 in Class 4 plus £179 Class 2 = £2,648 total NI annually.
Class 3 (Voluntary): £17.45 per week (£907 per year). Paid voluntarily to fill gaps in NI record for State Pension qualification.
Factors that Affect National Insurance Costs
💼 Employment Status
Employed workers pay Class 1 at 12% main rate, while self-employed pay Class 2 (£3.45/week) plus Class 4 at 9%. Self-employed people pay less NI overall but receive fewer benefits - no statutory sick pay, maternity pay, or unemployment benefits. On £30,000 earnings, employed workers pay £2,091 vs self-employed £1,748, a difference of £343 annually.
💰 Income Level
Higher earners pay more in absolute terms but lower percentage on highest earnings. Someone earning £20,000 pays £891 (4.5% of salary), while someone on £100,000 pays £5,915 (5.9% of salary). The additional rate of 2% on high earnings means NI becomes less progressive at higher incomes compared to Income Tax.
🎂 Age and State Pension
You stop paying National Insurance when you reach State Pension age (currently 66, rising to 67 by 2028). If you continue working past State Pension age, your employer still pays employer's NI (13.8%), but you stop paying employee NI. This effectively gives you a 12% pay rise when reaching pension age if continuing to work.
👥 Multiple Jobs
Each job calculates NI separately. If you have two jobs each paying £15,000, you pay NI on each (total £588 per job = £1,176 total), even though combined income is £30,000. You cannot combine earnings from multiple employments for NI purposes, potentially paying more than single-job equivalent.
📅 National Insurance Credits
Some situations provide NI credits without payment: claiming certain benefits (Universal Credit, Jobseeker's Allowance), caring for children under 12 (Child Benefit claimed), caring for disabled person 20+ hours/week, jury service, and approved training courses. These credits count toward State Pension without paying the £907/year voluntary contributions.
What National Insurance Pays For
🏥 NHS Funding
Significant portion of NI funds the National Health Service, providing free healthcare at point of use. Your NI contributions help fund hospitals, GP surgeries, prescriptions (free in Scotland, Wales), and emergency services.
💰 State Pension
You need 35 years of NI contributions for full State Pension (£11,502/year in 2025). Minimum 10 years required for any pension. Each year of contributions worth approximately £328/year in retirement. Missing years can be bought back through voluntary Class 3 contributions (£907/year).
🤰 Statutory Benefits
NI contributions fund statutory maternity/paternity pay, sick pay, bereavement benefits, and unemployment benefits. Self-employed workers paying only Class 2 and 4 don't qualify for these - employees pay more but get more protection.
How to Check Your National Insurance Record
Check your NI record online at GOV.UK using your Government Gateway account. Your record shows years of contributions, gaps, and projected State Pension. Gaps can be filled by paying voluntary Class 3 contributions (£907/year per missing year). You can usually pay for past 6 years, sometimes longer.
National Insurance vs Income Tax
While both deducted from salary, they're different taxes. Income Tax funds general government spending (education, defence, infrastructure) at rates of 20-45%. National Insurance specifically funds welfare and NHS at 12%/2% rates. Combined, basic rate taxpayers pay 32% on earnings £12,570-50,270 (20% Income Tax + 12% NI). Higher rate taxpayers pay 42% on £50,270-125,140 (40% + 2%).
FAQs
How much is National Insurance in the UK?
National Insurance is 12% on earnings between £12,570 and £50,270, then 2% on earnings above £50,270. Self-employed pay 9% (Class 4) plus £3.45/week (Class 2). You don't pay NI on earnings below £12,570 or after reaching State Pension age.
Do I have to pay National Insurance?
Yes, if you're employed earning over £12,570/year or self-employed with profits over £12,570. It's automatically deducted from employed workers' salaries. Self-employed must calculate and pay through Self Assessment. Voluntary contributions (£907/year) available for those not working to maintain State Pension entitlement.
What happens if I don't pay National Insurance?
Gaps in your NI record reduce State Pension entitlement - each missing year reduces pension by approximately £328/year in retirement. You may also lose entitlement to certain benefits. HMRC pursues unpaid NI with penalties and interest. Self-employed must pay through Self Assessment or face £100+ penalties plus interest.
Can I get National Insurance refund?
Refunds are rare but possible if you've overpaid due to errors, multiple employments pushing you over thresholds, or paying while exempt (over State Pension age). Contact HMRC with evidence. Refunds typically processed within 8-12 weeks. Most overpayments are small (£50-200) unless major error occurred.
How many years of National Insurance do I need?
35 years for full State Pension (£11,502/year), minimum 10 years for any pension. Each year from 10-35 increases pension proportionally. 20 years gives approximately £6,570/year pension. Check your forecast at GOV.UK and consider buying missing years if cost-effective.
Conclusion
National Insurance in the UK costs 12% of earnings between £12,570-50,270, then 2% above, with most workers paying £1,500-6,000 annually depending on salary. Combined with Income Tax, total deductions reach 32-42% on most earnings. While it feels like a significant cost, NI provides crucial benefits including State Pension (worth £11,502/year in retirement), NHS access, and statutory protections. Ensure you're building qualifying years toward full State Pension - each year of contributions is worth £328/year in retirement for life. Check your NI record regularly and fill any gaps through voluntary contributions if cost-effective. The investment pays dividends in retirement security and healthcare access throughout life. 💳
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Alan Frost |
| Grew up in and live in Birmingham. Writer, publisher, editor, EFL teacher, composer. |
