National Insurance rates
By Ian Robinson
National Insurance rates
National Insurance rates differ depending on what type of work you do. Here, we calculate how much tax each type of worker has to pay.
National Insurance has to be paid by both employed and self-employed workers.
Those who are out of work might also choose to make voluntary contributions so that they are eligible for the various benefits associated with the tax.
Class 1 National Insurance contributions
You pay Class 1 contributions on your salary or wage, commission, bonuses and overtime, as well as on sick pay and maternity, paternity and adoption pay from an employer.
National Insurance earnings threshold
NI is calculated on gross earnings (before tax or pension deductions) above the earnings threshold. For 2016-17, the National Insurance threshold is £155 a week (£8,060 a year).
- If you earn above the threshold, you pay 12% of your earnings between £8,060 and £43,000.
- Anything you earn above £43,000 a year, you pay National Insurance at 2%.
- If your earnings are below the earnings threshold, you pay no National Insurance contributions.
- You still build up rights to benefits provided you earn £5,824 a year or more up to the lower earnings limit.
- This is done through National Insurance credits.
Find out more: National Insurance credits – a detailed round-up of who is entitled to them
Class 2 National Insurance contributions
You pay Class 2 contributions if you are self-employed.
- Class 2 contributions are £2.80 a week for 2016-17.
- On profits (earnings minus allowable expenses) below a certain limit – £5,965 for 2016-17 – you can elect not to pay NI.
Class 4 National Insurance Contributions
If you're self-employed, you must additionally pay Class 4 contributions once your profits reach a certain limit.
- In 2016-17, Class 4 contributions are 9% of taxable profits between £8,060 and £43,000.
- On profits over £43,000, Class 4 contributions are 2% of profits.
Find out more: Tax for the self-employed – this comprehensive guide explains which taxes you are likely to have to pay
Class 3 National Insurance contributions
These are voluntary contributions that count towards your total contribution record. You can pay them only if:
- you're not working
- you're not liable for, or you're exempt from, Class 1 or Class 2 contributions
- your contributions for a specific year aren't enough to count towards state pension entitlement, or
- you live abroad.
The 2016-17 Class 3 NI rate is £14.10 a week.
If you're self-employed and exempt from Class 2 contributions on account of low profits, it is cheaper to pay Class 2 NI contributions voluntarily than make Class 3 NICs.
The same applies for years when you work overseas for a foreign employer but still want to get the benefits that paying NI entitles you to you for when you come back to the UK. Both count towards your benefits entitlement.
Class 3A National Insurance Contributions
A new type of voluntary contribution has been available from October 2015 for those who will have reached state pension age by 6 April 2016. Unlike normal NICs, these are made in a one-off lump-sum payment. Making them allows you to boost your state pension by up to a maximum extra of £25 a week. The idea is to bring the state pension you receive into line with the new single-tier state pension, which begins on 6 April 2016 for people who reach state pension age after that date.
The cost of Class 3A NICs falls with age (like any annuity).
For those aged 65, an extra £1 a week (£52 a year) of state pension income will cost £890. Increasing your state pension by £25 a week (£1,300 a year) will cost £22,250.
For those aged 70, an extra £1 a week will cost £779; for those aged 75, it costs £674; and for those aged 80, it will be £544.
Find out more: National Insurance and the state pension – how to boost your retirement income with voluntary contributions
Reduced rate National Insurance contributions
Until 1977, married women could opt to make National Insurance contributions at a reduced rate. They stopped building up entitlement to state pension in their own right and instead relied on their husband's National Insurance contributions record.
Women who took this option can continue to make reduced National Insurance contributions or pay at the full rate and build up individual pension entitlement. With reduced contributions, their maximum entitlement is currently 60% of basic state pension.
From 2016, any women in this position who have yet to reach state-pension age will no longer be eligible. Their pension entitlement will depend instead on the number of qualifying years' National Insurance contributions they have made in their own right. The minimum required to get any state pension is 10 years.
- Last updated: December 2016
- Updated by: Tom Wilson