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National Insurance (NI) is a contribution paid to HMRC by employees, their employers, and the self-employed. The purpose of National Insurance is to qualify people for certain provided benefits such as the State Pension.
You’ll pay the tax if you’re 16 or over and are either:
Employers also pay National Insurance for their employees who earn over £242 per week.
Once you reach the state pension age, you don’t need to pay NI at all.
Different taxpayers pay different kinds of National Insurance, called ‘classes.’
|NI class||Who pays||How is it paid||How much is it|
|Class 1||Employees earning more than £242 per week who are under State Pension age a year||Your employer deducts it through PAYE||12% (or 2% if you earn over £242 a week)|
|Class 1A or 1B||Employers for employees earning over £242 per week||Your employer pays it on top of your Class 1||14.53%|
|Class 2||Self-employed people earning over £6,725 a year||Through a Self Assessment tax return||Flat £3.45 per week|
|Class 3||Voluntary contributions – you can pay them to fill gaps in your NI record||Through a Direct Debit||£17.45 per week|
|Class 4||Self-employed people earning over £12,570 a year||Through a Self Assessment tax return||9% (or 2% if you earn over £50,270)|
If you’re employed then National Insurance will be automatically deducted from your monthly pay. However, if you’re self-employed, then you need to pay these contributions yourself. This is usually done through your Self Assessment tax return.
Whether you’re employed or self-employed, it’s important to make sure that you have the right tax code, so that you’re not underpaying or overpaying NI and Income Tax.
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