What is National Insurance?
National Insurance (NI) is a tax on earnings and self-employed profits that funds the State Pension, NHS, and other benefits. It was introduced in 1911 as a form of social insurance, and today it remains one of the UK's largest revenue raisers.
Unlike income tax, NI contributions also build your entitlement to certain state benefits, most importantly the State Pension. You generally need 35 qualifying years of NI contributions to receive the full new State Pension.
Key Difference from Income Tax
Income tax is charged on your total taxable income from all sources. National Insurance is charged separately on employment earnings and self-employment profits, with different thresholds and rates. You can owe NI even if you don't owe income tax, and vice versa.
National Insurance Classes
There are several classes of NI, each applying to different groups:
Class 1: Employees
This is the main class for employed workers. Both you and your employer pay Class 1 contributions.
Employee rates (2025/26):
- 8% on earnings between £12,570 and £50,270 per year
- 2% on earnings above £50,270
- Nothing on earnings below £12,570 (the Primary Threshold)
Employer rates (2025/26):
- 15% on earnings above £5,000 (the Secondary Threshold)
- Employers pay significantly more than employees
Example: NI on a £35,000 Salary
- Earnings above Primary Threshold: £35,000 - £12,570 = £22,430
- All within the main rate band (under £50,270)
- Employee NI: £22,430 x 8% = £1,794.40 per year
- That's £149.53 per month
Your employer also pays: (£35,000 - £5,000) x 15% = £4,500 per year
Class 2: Self-Employed (Flat Rate)
A small weekly flat-rate contribution for self-employed people with profits above £12,570.
- £3.45 per week (£179.40 per year) for 2025/26
- Paid through your Self Assessment tax return
- Counts towards your State Pension entitlement
- Voluntary if profits are between £6,725 and £12,570
Class 4: Self-Employed (Profit-Based)
The main NI charge for self-employed people, calculated on annual profits.
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
- Paid through Self Assessment alongside your income tax
Example: Self-Employed NI on £45,000 Profit
- Class 2: £3.45 x 52 = £179.40
- Class 4: (£45,000 - £12,570) x 6% = £1,945.80
- Total NI: £2,125.20 per year
Note: Self-employed NI rates are lower than employee rates, but you don't get employer contributions to your pension.
Class 3: Voluntary Contributions
You can pay voluntary NI contributions to fill gaps in your record:
- £17.45 per week (£907.40 per year) for 2025/26
- Useful if you've had career breaks, lived abroad, or earned below the threshold
- Can boost your State Pension entitlement
- You can usually fill gaps going back 6 years
NI Thresholds at a Glance (2025/26)
| Threshold | Weekly | Annual |
|---|---|---|
| Lower Earnings Limit (LEL) | £123 | £6,396 |
| Primary Threshold (employees start paying) | £242 | £12,570 |
| Secondary Threshold (employers start paying) | £96 | £5,000 |
| Upper Earnings Limit (UEL) | £967 | £50,270 |
What Does National Insurance Pay For?
Your NI contributions fund:
- State Pension — the full new State Pension is £221.20 per week (2025/26)
- NHS — a significant portion of NI revenue goes to healthcare
- Statutory Sick Pay and Maternity/Paternity Pay
- Jobseeker's Allowance (contribution-based)
- Employment and Support Allowance (contribution-based)
- Bereavement Support Payment
How to Check Your NI Record
It's worth checking your NI record periodically to make sure you're on track for the full State Pension:
- Go to the HMRC online service at gov.uk
- Sign in with your Government Gateway ID
- View your National Insurance record
- Check how many qualifying years you have
- See if there are any gaps you could fill
Watch Out for Gaps
If you've had periods of low earnings, unemployment, or time abroad, you may have gaps in your NI record. Filling these gaps with voluntary contributions can be one of the best financial investments you'll ever make — each qualifying year adds roughly £6.30 per week to your State Pension for life.
NI if You Have Multiple Jobs
If you work more than one job:
- Each employer deducts NI independently based on earnings from that job
- You may overpay if your combined earnings cross the Upper Earnings Limit
- You can apply for a deferment from HMRC to defer NI on your second job
- If you do overpay, you can claim a refund after the tax year ends
NI and the State Pension
To qualify for the full new State Pension of £221.20 per week, you need:
- 35 qualifying years of NI contributions
- A minimum of 10 qualifying years to get any State Pension at all
- Years where you earned above the Lower Earnings Limit count
- Years receiving certain benefits (like Child Benefit) also count as NI credits
Common Questions
Do I stop paying NI when I reach State Pension age?
Yes. Once you reach State Pension age (currently 66), you stop paying employee and self-employed NI contributions, even if you continue working. This means your take-home pay effectively increases.
Is NI the same as income tax?
No, though they're both deducted from your earnings. Income tax has a £12,570 Personal Allowance and progressive bands (20%, 40%, 45%). NI has its own thresholds and rates, and unlike income tax, employers also pay NI on your behalf.
Can I get a refund if I've overpaid?
Yes. Common reasons for overpayment include having multiple jobs or being incorrectly charged after State Pension age. Contact HMRC to claim a refund.
The Bottom Line
National Insurance is a significant part of your total tax bill, but it also builds your entitlement to the State Pension and other benefits. Understanding how it works helps you plan your finances and ensure you're not overpaying.
If you're employed, NI is handled automatically through PAYE. If you're self-employed, it's part of your Self Assessment. Either way, checking your NI record regularly ensures you're on track for the full State Pension when you retire.
Use our income tax calculator to see your full take-home pay breakdown including National Insurance.