Call our team +44 (0) 207 566 3939


A Guide to National Insurance

National Insurance or NI is the system where a person pays in money in order to receive certain benefits if they qualify for them.  One that we all eventually receive is the state pension while others could be unemployment payments or payments when you are on a low income and have children.


Everyone over the age of 16 who earns more than £155 a week is liable to pay NI.


How much you pay

National insurance is split into two sections – the part an employee pays and the part that their employer pays.  When you are self-employed, you have to pay both sections.  Class 1 is the rate that is paid by an employed person earning more than £155 per week and is made up from the amount they pay and the amount their employer pays.  A letter will designate how much this is.

An example would be someone who is a category A.  They would pay nothing for the first £155 per week that they earn and would pay 12% of any payment between £155 and £827 per week.  If they earn more than £827 a week (£3583 per month) they would pay a further 2% on this extra amount.

For that same person, the employer would pay nothing for the first £156 per week then 13.8% for payments between £156 and £827 a week and the same amount again for payments over £827 per week.


Category letters

So how are we allocated a letter that defines what we should pay?  The system is worked out on a number of details.  For example:

  • Category B – married women and widows who pay a reduced NI
  • Category C – employees who are over the state pension age
  • Category J – employees who don’t pay it because they are paying through another job
  • Category H – Apprentices under 25
  • Category M – Employees under 21
  • Category Z – Employees under 21 who are paying through another job

Everyone else is a category A and would come under the above example as to what they would need to pay apart from those who are classed as Category X and are under the age of 16, so therefore do not need to pay national insurance.


National Insurance rates for the self-employed

If you are self-employed, you pay two types of national insurance, depending on your income.  These are classed as Class 2 and Class 4 payments.  You pay Class 2 payments on profits over £5965 each year and you pay Class 4 payments on profits over £8060 a year.

The amount you pay for Class 2 is worked out as a flat rate of £2.80 per week.  Class 4, however, is worked out based on your profits.  If you earn between £8060 and £43,000 you will pay 9% NI while if you earn over £43,000 you will pay a further 2% on your earnings.  Both classes of NI are paid through the Self-Assessment system.

There are a few jobs that aren’t required to pay NI but agree to pay on a voluntary basis.  These include people who run businesses involving property or land, those who make investments for themselves or others without a commission or fee and those who work as examiners, moderators or set exam questions.  Also exempt are minister of religion who don’t receive a salary or stipend.

There are calculators available online that will help you work out how much NI and tax you will be required to pay on your earnings.  National insurance payments will be due at the same time as tax revenues for that period.

Related Category Posts

Making Tax Digital is Unknown to 20% of Micro-Businesses

Making Tax Digital is Unknown to 20% of Micro-Businesses

Making Tax Digital is Unknown to 20% of Micro-Businesses A new study by FreeAgent has shown that around 20% or one-fifth of micro businesses have no idea about the government’s Making Tax Digital scheme, despite the government publishing further information about the...

read more
HMRC Forms

HMRC Forms

There are a number of forms that a business is required to complete on an annual basis, and there are some that are required more often than this.  These forms are issued by HMRC and need to be completed accurately or the business could face a penalty in the form...

read more

Capital Office Ltd is registered in England and Wales: Registered Address: Kemp House 152 – 160 City Road London EC1V 2NX

Company Number: 06294297 | VAT No: 976201416 | ICO No: ZA084808 | Anti-money laundering registration number: XZML00000125126

© Copyright 2019 Capital Office Ltd - All Rights Reserved

Please click here to view the latest businesses using our address without authorisation.