If you've ever worked in the UK, chances are at one point you've wondered about where all those deductions on your pay slip go.
As well as income tax and pension payments, money is taken off to pay National Insurance (NI).
But many people can be unsure what their NI contributions go towards, with many assuming all the funds go towards things like the National Health Service.
Read more: Universal Credit: your rights if you get sick while claiming benefits
In fact, deductions to your pay are used to fund the benefits system which supports millions of people on low income or who are otherwise struggling financially.
Here's what to know about what National Insurance is, how much you pay and how to check your contributions.
What is National Insurance?
You pay National Insurance contributions to qualify for certain benefits and the state pension if you're 16 or over and either:
- an employee earning above £184 a week
- self-employed and making a profit of £6,515 or more a year
You need a National Insurance number before you can pay NI. You can find your NI number on your payslip, on your P60, on tax, pensions or benefits letters or in the NI section of your personal tax account.
What is it for?
There are several types of National Insurance contributions. These are:
- Class 1 - For employees earning more than £184 a week and under state pension age - these are automatically deducted by your employer
- Class 1A or 1B - Employers pay these directly on their employee’s expenses or benefits
- Class 2 - for self-employed people earning 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 which you can pay to fill or avoid gaps in your National Insurance record
- Class 4 - For self-employed people earning profits of £9,569 or more a year
National Insurance contributions count towards the benefits and pensions you can claim. These are:
- Basic state pension
- Additional state pension (except for class 2 and 3)
- New state pension
- Contribution-based jobseeker's allowance (except for class 2 and class 3)
- Contribution-based employment and support allowance (except class 3)
- Maternity allowance (except class 3)
- Bereavement support payment (except class 3)
Class 4 contributions do not usually count towards state benefits.
How much do I pay?
The amount of National Insurance you pay depends on your employment status and how much you earn.
From April 6, 2022 to April 5, 2023 National Insurance contributions will increase by 1.25%. This will be spent on the NHS and social care in the UK.
The increase will apply to:
- Class 1
- Class 4
- secondary Class 1, 1A and 1B
The increase will not apply if you are over the state pension age.
If you're employed, your rate for the 2021 to 2022 tax year are 12% if your pay is between £184 and £967 a week (£797 to £4,189 a month) and 2% if it is over £967 a week.
There are different rules if you're self-employed, which you can read about here.
You pay National Insurance with your tax, and your employer will take it from your wages before you get paid. Your payslip will show these deductions.
How do I check my National Insurance record?
You can check your National Insurance record online to see what you’ve paid up to the start of the current tax year, any National Insurance credits you’ve received, and check if gaps in contributions or credits mean some years do not count towards your state pension.
You can also check if you can pay voluntary contributions to fill any gaps and how much this will cost.
You will need a government gateway ID and login to access your online account. If you don't have one, you can set one up here.
I have gaps in my NI record - what do I do?
You may get gaps in your record if you do not pay National Insurance or do not get National Insurance credits. This could be because you were:
- employed but had low earnings
- unemployed and were not claiming benefits
- self-employed but did not pay contributions because of small profits
- living or working outside the UK
Gaps can mean you will not have enough years of National Insurance contributions to either get the full state pension or qualify for some benefits.
You may be able to pay voluntary contributions to fill any gaps if you’re eligible. You can check if thisis possible and how much it would cost here.
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