National Insurance Contributions (NIC)
National Insurance is the name given to the UK’s social security contribution fund. National Insurance (NI) contributions are paid by employees and the self-employed who are over 16 years of age and earn over a certain threshold income.
For the 2019-2020 tax year, you will pay NI contributions if:
- you are an employee earning above £166 a week
- you are self-employed and making a profit of £6,365 or more a year
National Insurance Classes
There are several different types of National Insurance contributiopns, referred to as classes, and the class that applies to you depends on your employment status and how much you earn, and whether there are any gaps in your National Insurance record.
Subject to Class 1 National Insurance; Primary contributions are paid by the employee and Secondary contributions are paid by the employer.
Subject to Class 2 and Class 4 National Insurance Contributions, depending on profits. The Government has indicated an intention to abolish Class 2 contribtions but no firm date has been set.
NIC Rates (2019/2020)
The rates for National Insurance Contributions are currently:
Class 1 Primary Contributions:
- As an employee, you pay 12% on earnings between £166 and £962 per week (between £719 and £4,167 per month) and 2% on earnings thereafter.
Class 1 Secondary Contributions:
- Depends on how employees are categorised, but typically 13.8% on earnings above £719 per month/£8,632 per month.
Class 2 Contributions:
- £3.00 per week.
Class 4 Contributions:
- 9% on annual self-employed profits between £8,632 and £50,000 and 2% on profits thereafter.
People who are absent from the UK but wish to maintain their contributions records may also make voluntary Class 3 contributions of £15.00 per week.
Note, for temporary residents in the UK, it is not possible to arrange a reimbursement of national insurance contributions, but those who have spent a considerable period in the UK may have an entitlement to a UK state pension. The entitlement may also be increased by making additional voluntary contributions as indicated above.
Employees on properly structured assignments into the UK may not need to pay National Insurance Contributions, but any employer seeking to utilize this form of assignment should seek professional tax advice via our Inquiry Form.