Employees in the United Kingdom are required to start paying Class 1 National Insurance Contributions (NIC) from the age of 16, provided they earn a sufficient income. On the other hand, employers are responsible for paying Class 1 NIC based on a specific table of rates (see below).
It is important to note that employees' Class 1 NIC payments cease once they reach their State Pension age. However, the employer's contribution to NIC continues even after the employee transitions into retirement, ensuring ongoing support for the workforce.
This system of contributions plays a crucial role in funding various social security benefits and pensions for individuals in the UK.
Class 1 National Insurance Contributions
Employees - Class 1 - 2024/25
| Earnings per week | % |
|---|---|
| Up to £242* | Nil |
| £242.01 - £967 | 8 |
| Over £967 | 2 |
Entitlement to state pension and other contribution-based benefits is retained for earnings between £123 and £242 per week.
Employers - Class 1 - 2024/25
| Earnings per week | % |
|---|---|
| Up to £175 | Nil |
| Over £175 | 13.80 |
For employees under the age of 21, as well as apprentices under the age of 25, the employer NIC rate is reduced to 0% up to the Upper Secondary Threshold of £967 per week. This reduction also applies to veterans in their first 12 months of employment.
Other National Insurance payable by employers
In addition to Class 1 contributions, employers in the United Kingdom may also be required to pay Class 1A and Class 1B National Insurance contributions.
- Class 1A contributions are set at a rate of 13.8% and apply to broadly all taxable benefits provided to employees. Employers must also pay Class 1A NIC on certain taxable termination payments that exceed £30,000.
- Class 1B contributions are also charged at a rate of 13.8% and apply to taxable PAYE Settlement Agreements.
Self-employed National Insurance Contributions
Self-employed individuals in the United Kingdom are required to start paying Class 2 National Insurance Contributions (NIC) and Class 4 NIC from the age of 16, provided they have sufficient profits.
Class 2 NIC payments cease once the individual reaches State Pension age. However, as of 6 April 2024, there is no longer a mandatory requirement to pay Class 2 NIC. Nevertheless, individuals can still choose to make voluntary contributions to maintain their entitlement to state pension and other benefits.
Similarly, Class 4 NIC payments also stop from the start of the tax year following the year in which the individual reaches State Pension age.
Self-employed - Class 2 - 2024/25
| Flat rate per week | £3.45 |
| Small Profits Threshold | £6,725 per year |
| Lower Profits Limit | n/a |
A self-employed individual who earns below the Small Profits Threshold may choose to continue making voluntary payments for Class 2 NIC in order to secure eligibility for State Pension and other associated benefits.
Class 4 - 2024/25
| Annual profits | % |
|---|---|
| Up to £12,570 | Nil |
| £12,570.01 - £50,270 | 6 |
| Over £50,270 | 2 |
Class 3
In order to qualify for a full State Pension, an individual must have accumulated 35 years of National Insurance Contributions (NIC), or 30 years if their State Pension age falls before 6 April 2016.
For those who may have gaps in their NIC record, Class 3 voluntary contributions offer a solution to fill or avoid these interruptions.
Class 3 - 2024/25
| Flat rate per week | £17.45 |
Tom Fletcher
View my articlesTags: Payroll, Private Client
