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Nine things you need to know about National Insurance in 2018

Make sure you're up-to-date with NI

Nine things you need to know about National Insurance in 2018

National Insurance contribution receipts have increased by more than 35% over the past 10 years, the latest figures published by HMRC show.

National Insurance (NI) is a form of income tax paid by employers, employees and self-employed people during the time you’re in employment aged over 16, until you reach state pension age.

We explain what’s going on with National Insurance and what you need to know about how this tax works in 2018.

1. National Insurance contributions are steadily increasing

In 2017-18, the HMRC receipts from National Insurance reached a new high of £130.93bn – up £6.46bn on what was paid in 2016-17.

This represents a 35% increase compared with what people were paying 10 years ago.

Class 1 contributions from employers and employees haven’t risen in the past few years, so the increase could be due to higher Class 2 contribution rates, which are paid by self-employed workers.

2. National Insurance payments might go up

As NHS and social care funding continue to spark concern, there has increasingly been talk of raising the tax by an extra 1p in the pound. A report by thinktank IPRR estimated this would raise an additional £12bn per year by 2021-22.

What’s more, in the government actuary’s department recent review, a state pension shortfall was predicted to occur from the 2030s – and one proposed solution was to increase NI rates by up to 5%.

At this stage, these are just proposals, and the government has not committed to any NI changes. It’s likely we’ll need to wait until the Autumn Budget to see if any increases are on the horizon.

3. You can earn more in 2018-2019 before paying NI

If you’re employed, National Insurance is automatically deducted from your salary, and you’ll pay Class 1 contributions.

Compared with last year, you’re able to earn more before paying National Insurance.

How much you pay depends on your salary – the table below shows the Class 1 contribution rates for 2018-19 compared to the year prior.

Annual salary threshold 2018-2019 Annual salary 2017-2018 Class 1 NI rate
Less than £8,424 Less than £8,164 0%
£8,424-£46,350 £8,164-£45,000 12%
More than £46.350 More than £45,000 2%

To see how much National Insurance you’re likely to pay, try our calculator or head to our guide on National Insurance rates.

4. NI rates for the self-employed have crept up

Self-employed workers need to pay National Insurance contributions through their self-assessment tax return. Most self-employed people will pay Class 2 and Class 4 contributions, depending on how much they earn.

Self-employed people pay slightly more for Class 2 contributions in this financial year than the one before – £2.95 per week instead of £2.85.

The table below shows the Class 2 and Class 4 payment thresholds.

Annual salary NI contribution rate
£6,205-£8,424 Class 2 contribution of £2.95 per week
£8,424-£46,350 Class 2 and Class 4 contributions of 9%
More than £46,350 Class 2 and Class 4 contributions of 2%

If you earn below the threshold for Class 2 contributions, you don’t need to pay any National Insurance. But you might opt to make Class 2 contributions anyway to ensure you don’t have gaps in your record and receive the full state pension.

5. Always register for child benefit, even if you earn too much

If you’ve stopped work in order to bring up children, you should register for child benefit to avoid gaps in your NI contributions.

This is true even if you or your partner earn over the £60,000 a year, when the high income benefit charge means you’ll have to pay back your entire child benefit payments through tax.

If this is your situation, you can still register for the benefit and just opt out of receiving payments. This will ensure you’ll receive the NI credits you’re entitled to.

What’s more, registering for child benefit will also make it easier when your child reaches 16, as they’ll already be on the system and are more likely to receive their own NI number on time.

6. National Insurance is required to earn some benefits

Aside from the state pension, there are a number of benefits that you become entitled to by paying National Insurance, depending on your circumstances.

Making National Insurance contributions will count towards your entitlement for:

  • Jobseeker’s Allowance and Employment and Support Allowance
  • Maternity allowance – this is only applicable if you don’t qualify for statutory maternity pay
  • Bereavement benefits, including Bereavement Allowance, Bereavement Payment and Widowed Parent’s Allowance
  • Employment and Support Allowance – if long-term illness or disability means you will face long-term unemployment.

Some benefits require a certain class of NI payment to have been made. For instance, contribution-based Jobseeker’s Allowance and Employment and support allowance will only be paid to those who have made Class 1 contributions.

Maternity allowance requires Class 1 or Class 2 contributions to have been made – Class 3 contributions are not eligible.

7. You can still gain NI credits if you’re not working

If you’re currently out of work – for example, you’re a carer or you’re unable to work due to illness – there are things you can do to avoid having any gaps in your contribution record.

In some situations, you may get NI credits automatically, or you might have to apply for them. The credits will either be for Class 1 or Class 3, depending on your circumstances.

Class 3 credits only count towards the state pension and bereavement payments, while Class 1 entitles you to a wider range of benefits.

You can find out more in our explanation of National Insurance credits.

8. You can fill gaps in your record

If you’re nearing retirement and have had periods where you may have missed making some NI contributions, you should check your record to ensure you’ve paid enough to qualify for the state pension.

To do this, you can log in online or request a paper copy of your National Insurance Statement to be sent to you.

Your record won’t show how much state pension you’re likely to get, but you’ll be able to see your history of contributions – to receive the maximum amount of pension, you need 35 years’ worth.

If you don’t have enough, you may be able to top up by making Class 3 voluntary contributions. You can usually go back a maximum of six years to fill NI gaps, but some people may be able to go back further.

9. You’ll automatically be enrolled at 16

If you live in the UK, you’ll normally be sent a National Insurance number automatically just before your 16th birthday.

If it doesn’t arrive and you’re under the age of 20, you can call the National Insurance number helpline on 03002003500 – the number will then be posted to you and should arrive within 15 working days.

If you’re over 20 and haven’t been given a National Insurance number, you’ll have to go through the process of applying for one.

This may involve going for an interview with Jobcentre Plus, where you’ll be asked about your personal circumstances and why you need a National Insurance number. You’ll need to bring several documents to prove your identity, such as a passport, birth certificate or marriage certificate.

You need to have applied for an NI number before you can start working, but you can begin your employment before it’s delivered. You’ll have to be able to prove that you can legally work in the UK. You should let your employer know that you’ve applied for one, and give it to them once it’s arrived, so you can start paying contributions.

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