National insurance

National Insurance

National Insurance is run by Her Majesty's Revenue and Customs (HMRC).

What is National Insurance

National Insurance is basically a tax on employment like income tax but the funds are paid towards benefits. Some of the benefits, for example state pension, are only available if the person has made sufficient National Insurance Contributions. Funds from NI Contributions also help to pay for the National Health Service and other benefits such as Maternity Pay, Sick Pay etc.

National Insurance Classes

Class 1
Both Employees and Employers pay class 1 contributions

Class 1A
Paid by employers for certain employee benefits such as company cars

Class 2
Self Employed Contributions based on income taken

Class 3
Voluntary Contributions to enable people to catch up on missing payments required to reach entitlement for state pension

Class 4
Self Employed Contributions based on end of year profits

National Insurance Rates

Read more information on Contracted In and Contracted Out Rates.

Employers National Insurance Rates

Employers also contribute towards the NI of their employees but this does not come out of employee salary. Employers NI rates are:-

2008 to 2009
12.8% for employees earning above £105 per week

2009 to 2010
12.8% for employees earning above £110 per week

Class 1A NICs

Employers also have to pay class 1a NICs once a year for benefits provided to employees. The current rate is 12.8%

What is State Second Pension?

State Second Pension or S2P replaces SERPS. S2P started from 6 April 2002 and the Upper accruals point starts in 2009-2010 at £770 per week. S2P's are paid in addition to the state pension, to learn more about S2P then our Pensions guide should provide you will more information.

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Updated on 26th November, 2009

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