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UK National Insurance Contributions | Rates, Thresholds, and Allowances Explained

Published by UK Property Accountants,
Posted Date: May 24, 2023 , Modified Date: June 3, 2024

National Insurance Contributions (NICs) are a form of tax paid by workers and employers in the United Kingdom to fund various state benefits and services such as the National Health Service (NHS), State Pension, and other social security benefits.

The history of NICs dates back to the early 20th century when the National Insurance Act was introduced in 1911.

The Act established a system of insurance against sickness and unemployment, and it was funded through contributions from employees, employers, and the government. Over time, the system was expanded to include additional benefits, such as the State Pension.

Types of National Insurance Contributions and Who Pays Them

employment status and earning NIC

There are four main types/classes of National Insurance Contributions (NICs) in the UK. The class you pay depends on your employment status and how much you earn.

National Insurance

Who Pays

Class 1 NIC

These are paid by employees and employers on the employee's earnings.

Class 2 NIC

These are paid by self-employed people with profits over a certain threshold. The contribution rate is a flat weekly rate.

Class 3 NIC

These are voluntary contributions that can be made by people who are not eligible to pay Class 1 or 2 NIC. Class 3 NIC can help to fill gaps in a person's National Insurance record and protect entitlement to the State Pension.

Class 4 NIC

These are paid by self-employed people on their profits above a certain threshold. The contribution rate is a percentage of the profits.

In addition, employers may also be required to pay Class 1A NICs on certain taxable benefits provided to their employees, such as company cars or private medical insurance.

There are also some circumstances where individuals may be exempt from paying National Insurance Contributions, such as those who are under the age of 16, earning below the earnings threshold, or retired and receiving a State Pension.

However, it is important to check with HM Revenue and Customs (HMRC) for specific details regarding individual circumstances.

Rates and Threshold for National Insurance Contributions

criteria national insurance contributions (NIC)

The rates of National Insurance Contributions (NICs) depend on the type of NIC and the level of earnings or profits.

Here's a brief overview of the current rates for the tax year 2024/25.

Class 1 NICs

Class 1 NICs are contributions that are paid by both employees and employers on the employee's earnings.

Class 1 Secondary Contribution Rates (Employee)

Employee’s Earnings

Class 1 Primary NIC Rate

£242 to £967 a week

(£1,048 to £4,189 a month)

8%

Over £967 a week

(£4,189 a month)

2%

Class 1 Secondary Contribution Rates (Employer)

Employee’s Earnings

Class 1 Secondary NIC rate

Over £175 a week

 (£758 a month)

13.8%

Class 1A NICs

Class 1A NICs are calculated as a percentage of the taxable value of the benefit and are paid in addition to Class 1 NICs.

Class 1A NIC

13.8% of Taxable Value of Benefits

Class 2 NICs

Class 2 National Insurance Contributions (NICs) are a form of tax paid by self-employed individuals in the UK above a certain profit threshold.

Profits

Class 2 NIC Rate

Above £12,570 a year

£3.45 per week

Class 3 NICs

It's important to note that Class 3 NICs are not the same as Class 1 or Class 2 NICs, which are mandatory contributions paid by employees and self-employed individuals on their earnings and profits.

Class 3 NIC

£17.45 per week

It's also worth noting that there are time limits for paying Class 3 NICs, and it may not always be possible to fill all gaps in the National Insurance record through voluntary contributions. Therefore, individuals should seek advice from a qualified tax advisor or HMRC before making any voluntary NIC payments.

Class 4 NICs

Class 4 National Insurance Contributions (NICs) are a form of tax paid by self-employed individuals in the UK on their profits.

Profits

Class 4 NIC Rate

£12,570 to £50,270 a year

9%

Over £50,270 a year

2%

How to Check Your NICs Record

To check your National Insurance Contributions (NICs) record in the UK, you can follow these steps:

  • Go to the government's "Check your National Insurance record" webpage on the gov.uk website.
  • Click on the "Check now" button to start the process.
  • You will need to log in to your personal tax account. If you don't have one, you can create one by following the instructions on the screen.
  • Once you're logged in, you will see your personal tax account dashboard. Click on the "National Insurance" tab.
  • Under the "National Insurance record" section, you can see your current NICs record, including the tax years you have paid, any gaps in your contributions, and any credits you have received.
  • You can also see an estimate of your State Pension and any other benefits you may be entitled to based on your NICs record.
  • If you have any missing or incorrect NICs, you can follow the instructions on the webpage to fill in any gaps or correct any errors.

It's important to check your NICs record regularly to ensure that it is accurate and up-to-date, and to make sure you are eligible for any benefits you may be entitled to.

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