National Insurance explained National Insurance contributions

National Insurance contributions (NICs) build up your entitlement to state pension.

Full state pension is paid only to those who have an adequate record of National Insurance contributions. 

From April 2016, you'll have to have made 35 years of contributions.  

Find out more: How do I qualify for state pension? -  a full round-up of the criteria you need to meet 

National Insurance payments

Most people who work pay National Insurance contributions. The class, or type, you pay depends on your employment status.

National Insurance and employees 

Employees and most agency workers make Class 1 contributions, collected via PAYE, together with their income tax.

National Insurance and the self-employed

If you're self-employed, you normally pay Class 2 National Insurance contributions and usually Class 4 NICs as well. 

Class 3 National Insurance contributions are those that you can pay voluntarily. See National Insurance rates for more details and 2016/17 rates.

National Insurance and students

You don't start paying National Insurance until you're over 16 years old. Students who are older than this are not exempt. If they earn enough, they pay like any other employee. 

If students don't do paid work, they are not credited with NICs for the years they are studying. This creates a 'gap' in their contributions record, though most will still work for enough years after qualifying to merit a full state pension.

National Insurance and low earners 

You don't have to pay National Insurance if you earn below a certain amount - in 2016-17, this is £8,060. 

The same applies if your self-employed profits are very low - below £5,965 in 2016-17 - though opting not to make Class 2 National Insurance contributions if you're self-employed may deprive you of some benefits.

National Insurance credits

There can be gaps in your contributions record if you don't pay National Insurance, but in many circumstances you'll be 'credited' with contributions by HMRC.

National Insurance credits can help you qualify for certain contributory benefits, such as basic state pension, if you're unemployed or unable to work through sickness. 

You usually get credits automatically, provided that you're drawing some kind of benefit.

Home responsibilities protection also helps protect basic pension entitlement for people receiving child benefit for a child under 16 or regularly caring for a sick or disabled person or a foster child.

Find out more: National Insurance credits - a detailed explanation of who is entitled to them

National Insurance and older people 

You no longer have to pay National Insurance once you reach the state pension age (currently 65 for men and increasing to 65 for women by 2018), even if you carry on working beyond this. 

Find out more: Tax in retirement - our guide explains how much tax pensioners are expected to pay

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Last updated:

April 2016

Updated by:

Ian Robinson


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