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What is National Insurance ?

what is national insurance

Definition of National Insurance

National Insurance is money paid to HMRC by employees, employers, and the self-employed.

National Insurance is often abbreviated to NI. or NIC. where the 'C' stands for contributions.

Different people pay different kinds, or 'classes', of National Insurance.

Employee National Insurance

Class 1 employee’s NI is usually calculated on each individual payment of wages, regardless of how much salary is received in the rest of the year. The calculation is based on each payment alone.

There’s an optional exception for company directors, who may choose instead to pay their employee's NI on the basis of their salary for a complete tax year, which means they may not start to pay employee's NI till some months into the tax year.

Self-employed National Insurance

Self-employed individuals pay two classes of NI, a flat weekly rate called class 2, and a percentage of their profits, called class 4.

What you get for your National Insurance

Paying class 1 employee's NI and class 2 NI entitle you to receive certain state benefits, such as the State Pension. If you haven't made enough NI contributions, you may not get the full State Pension.

The current National Insurance rates are available on the website .

Frequently Asked Questions

Is there a class 3 National Insurance?

Yes! Class 3 National Insurance is a voluntary amount that you can pay if you need to top up your NI contributions, so that you receive the full State Pension.

Category: Insurance

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