National Insurance Contributions (NICs) What Are They?
National Insurance Contributions were introduced with the National Insurance Act 1911 and further expanded upon in 1948. They were initially introduced to protect people from illness and unemployment and then went on to support retirement benefits at state pension age, but what are National Insurance Contributions?
National Insurance Contributions are a tax paid in the UK. By paying National Insurance Contributions, you’re entitled to certain benefits, one of which is a state pension.
If you want to find out who pays national insurance contributions, If you’ve paid enough to qualify for state pension, and what you can do if you haven’t, keep reading.
Who pays national insurance?
You start paying National Insurance contributions when you’re 16 and earn over £184 a week in paid employment, or if your self employed and make a profit of over £6,515 a year.
The National Insurance class you fall under is worked out by your employment status and how much you earn. Our UK team will be able to delve into details and offer advice on retirement planning.
Below is a table showing what employment status of each class is.
|Class 1: Employees||Class 2: Self Employed||Class 3: Voluntary National Insurance Contributions|
|Basic State Pension||Yes||Yes||Yes|
|Additional State Pension||Yes||No||No|
|New State Pension||Yes||Yes||Yes|
Below is a table showing who pays what for each National Insurance class:
|National Insurance Class||Who Pays|
|Class 1||Employees earning more than £184 a week and under State Pension age – they’re automatically deducted by your employer|
|Class 1A or 1B||Employers pay these directly on their employee’s expenses or benefits|
|Class 2||Self-employed people earn profits of £6,515 or more a year. If you’re earning less than this, you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record|
|Class 3||Voluntary contributions – you can pay them to fill or avoid gaps in your National Insurance record|
|Class 4||Self-employed people earning profits of £9,569 or more a year|
How much is national insurance?
How much you’ll pay in National Insurance depends on what kind of National Insurance you’re paying. We’ve summarised each of the national insurance classes below.
Class 1 National Insurance Rates (2021/22)
As an employee, you begin paying National Insurance when you earn over £184 a week in 2021/2022.
The amount of National Insurance you pay depends on how much you earn. It’s made up of:
12% of your weekly earnings between £184 and £967 (2021/22)
2% of your weekly earnings above £967.
On 6 April 2022, Class 1 NIC’s will go up by 1.25% to cover the costs of social care and help deal with the NHS backlog.
Class 2 National Insurance rates (2021/22)
Self-employed people pay Class 2 weekly contributions at a flat rate of £3.05 and are set for 2021-2022. If your profits are over £6,515 you need to pay them every week (or partial week) you’re self-employed in a tax year.
If you earn less than £6,515, paying NICs is voluntary but will still help build up your entitlement to the state pension.
Voluntary ‘Class 3’ National Insurance rates (2021/22)
If you need to pay national insurance contributions, Class 3 voluntary NICs were introduced to fill the gaps in your NI record, with the end goal being a higher state pension. The maximum weekly rate you can pay in 2021-2022 is £15.40.
Class 4 National Insurance rates (2021/22)
If you’re self-employed and make profits of £9,9or more in 2021-22 (£9,500 in 2021-22), you pay Class 4 National Insurance contributions.
If you’re over this, you pay 9% on profits between £9,569and £50,270 in 2021-22 (£9,500 and £50,000 in 2020-21).
How many years NI contributions are needed for a full pension?
To receive the new state pension you need to have a minimum of ten qualifying years. To make sure you receive the full new state pension and not a reduced amount, you have to have 35 qualifying years of NICs.
When do I qualify for State Pension?
You are eligible for New State Pension when you reach state pension age, which at the moment is 66 (2022).
The table below shows when you qualify for state pension based on your date of birth.
|Date of birth||Date State Pension age reached|
|6 December 1953 – 5 January 1954||6 March 2019|
|6 January 1954 – 5 February 1954||6 May 2019|
|6 February 1954 – 5 March 1954||6 July 2019|
|6 March 1954 – 5 April 1954||6 September 2019|
|6 April 1954 – 5 May 1954||6 November 2019|
|6 May 1954 – 5 June 1954||6 January 2020|
|6 June 1954 – 5 July 1954||6 March 2020|
|6 July 1954 – 5 August 1954||6 May 2020|
|6 August 1954 – 5 September 1954||6 July 2020|
|6 September 1954 – 5 October 1954||6 September 2020|
|6 October 1954 – 5 April 1960||66th birthday|
You will need to have 30 qualifying years of National Insurance contributions or credits to get the full basic State Pension.
How do I check my national insurance contributions?
If you want to check your national insurance contributions, the best place to do so is here, Government Gateway.
It will tell you:
- What National Insurance payments or credits you have for the tax years requested;
- What class of contributions you made;
- If there are any payment or credit gaps (years with payment gaps may not count towards your State Pension);
- Whether you can pay voluntary contributions to fill the gaps and how much it will cost.
However, it won’t tell you how much state pension you’re entitled to.
You can also call the National Insurance helpline on 0300 200 3500 to request a statement.
How do I make up a shortfall in my National Insurance Contributions?
If you don’t pay National Insurance contributions, you might want to pay Class 3 voluntary contributions to boost your pension entitlement.
In 2021-22, Class 3 contributions are payable at a weekly rate of £15.40. This is the maximum you can pay each week. Rates for previous tax years will be different.
You might not always be able to pay Class 3 contributions for a tax year.
That’s why it’s important to find out whether:
- you can make payments towards any gaps
- how much you’ll need to pay
- you will benefit from making any voluntary National Insurance contributions.
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