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.
- Get a head start on your 2016-17 tax return with the Which? Tax Calculator. Tot up your bill, get jargon-free, money-saving tips and submit your return direct to HMRC.
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 2017-18, the National Insurance threshold is £8,164 a year.
- If you earn above the threshold, you pay 12% of your earnings between £8,164 and £45,000.
- Anything you earn above £45,000 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 £5,876 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 £2.85 a week for 2017-18.
- On profits (earnings minus allowable expenses) below a certain limit – £6,025 for 2017-18 – 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 2017-18, Class 4 contributions are 9% of taxable profits between £8,164 and £45,000.
- On profits over £45,000, 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 2017-18 Class 3 NI rate is £14.25 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, though you will only be able to do this until April 2018.
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.
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.
Since 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: April 2017
- Updated by: Tom Wilson