National Insurance contributions
Find out why we pay National Insurance contributions (NICs), whether you're liable to pay them and, if so, how much.
What do NICs pay for?
The UK's National Insurance scheme allows you to pay contributions to build up your entitlement to certain social security benefits, such as the State Pension.
Your entitlement to many benefits will depend on your NIC record. If you claim a benefit or tax credit you'll need a National Insurance number.
Do I have a National Insurance number?
A National Insurance number (NINO) is your own unique account number that keeps track of your NICs and any benefits that have been paid to you. You will also need a NINO in other circumstances, such as when applying for a job or opening an Individual Savings Account (ISA).
If you lived in the UK as a child and your parent received Child Benefit for you, you should have been registered automatically for National Insurance and received a National Insurance card showing your number just before your 16th birthday.
If you've lost your NINO or are unsure what it is, you may be able to find it on official documents, such as your wage slip. If you need help finding it, contact your nearest benefits office or HM Revenue & Customs (HMRC). You can also ring the National Insurance Registrations Helpline on 0845 915 7006.
If you don't have a NINO, you're legally obliged to apply for one if you start work or claim a benefit in the UK. If you're aged 20 or over you should ring JobCentre Plus on 0845 600 0643.
Remember: you must never let anyone else use your number.
Do I have to pay NICs?
You pay NICs if you:
- Work for an employer or are self-employed
- Are aged between 16 and the state pension age - until 2010 this age is 60 for a woman and 65 for a man
- If you are employed, and your earnings are more than £139 per week.
You normally only have to pay NICs if you live and work in Great Britain or Northern Ireland. However, there are some circumstances in which you have to, or can choose to, pay NICs while working abroad.
If you're unsure about whether you have to pay NICs, contact your local Citizens Advice Bureau (CAB) for advice. If you live or work abroad as a UK citizen and would like information about making contributions, read the HMRC's guide to NICs if you live or work abroad.
If you're not liable to pay NICs, you may still want to in order to safeguard or improve your benefit entitlement for Basic State Pension and Bereavement Benefits. You can do this by paying contributions on a voluntary basis.
Employers also have to pay NICs for each person they employ who is aged 16 or over and whose earnings are above a certain amount.
Classes of NICs
There are six classes of NICs. The class that applies to you will affect when and how much you pay:
- Class 1 - paid by people who work as employed earners, and their employers.
- Class 1A - paid only by employers who provide certain directors and employees with benefits in kind, which are available for private use, for example, cars and fuel.
- Class 1B - paid only by employers who enter into a Pay As You Earn (PAYE) Settlement Agreement (PSA) with HMRC for tax purposes.
- Class 2 - paid by people who are self employed.
- Class 3 - voluntary contributions paid by people who wish to protect their entitlement to the State Pension and who don't pay enough National Insurance contributions in another class.
- Class 4 - normally paid by self employed people in addition to Class 2 if their profits are above a certain level. Class 4 contributions don't count towards benefits.
To find out the amount you pay, take a look at HMRC's table of Rates and Allowances.
Have I paid too much in NICs?
There are some circumstances in which you may have paid too much in NICs. For example, this may happen if you stopped being self employed and continued to pay Class 2 NICs. The National Insurance Contributions office usually gets in touch if you've paid £38.50 or more above the annual limit for Class 1 and/or Class 2 NICs.
However, if you think you've overpaid but haven't been notified, you can write to HMRC after the end of the tax year (5 April). For information about what details to include in your letter, take a look at HMRC's factsheet on getting a refund.
Have I paid too little in NICs?
The HMRC will send you a notification letter if it believes you've not paid or been credited with enough NICs in the tax year shown on the letter. It gives you the opportunity to tell the HMRC if you think its record is wrong.
Written by Matt Whyman
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