National Insurance Contributions

Published: 01 Sep 2013

Updated: 18 Mar 2018

 

Written by Ray Coman

 

All UK taxpayers are liable to national insurance between the age of 16 and state pension age.  A person outside of these age limits is not liable to national insurance on their income.

 

National Insurance Contributions on Employment

 

Class 1 2018-19
Employer  Employee
Earnings per week Rate Payable  Earnings per week Rate payable
£0.01 - £162.00 Nil £0.01 - £162.00 Nil
£162.01-£892.00 13.80% £162.01-£892.00  12% 
Over £892.00 13.80% Over £892.00 2%
Class 1A & 1B (employers only)   13.80%    
Class 2 (self employed) £2.95 per week (small profits threshold £6,205)  
Class 3 (voluntary) £14.65 per week    
Class 4 (self employed) Profits up to £8,424 0%
Profits from £8,424 to £46,350   9%
  Profits above £46,350 per annum 2%

Note: The first £3,000 of employer's liability relieved by the employment allowance. No employers NIC for employees aged under 21 (and apprentices up to age 25) on earnings up to £892.00 per week (the Upper Earnings Limit). Apprenticeship Levy at 0.5% payable on annual pay bills in excess of £3 million net of £15.000 annual allowance.

 

Class 1 NICs are payable on employment earnings.

 

The lower earnings limit is the amount of earnings up to which a person will not accrue any social security benefits.

 

A taxpayer requires a number of qualifying years (35 years from 2016/17) to secure entitlement to the basic state pension.  A year of earnings above the lower earnings limit will add a year towards the minimum number required to secure a basic state pension.

 

Where an employer does not pay any employee or director above the lower earnings' limit, there may not be a requirement to register as an employer with HMRC.

 

The primary limit is the threshold at which an employee become liable to NICs and the secondary threshold is the limit at which the employer becomes liable to pay NICs.

 

From 2016/17 it is no longer possible to accrue an additional state pension based on making more national insurance contributions.  Consequently, there is no longer an upper accruals point.

 

The employment allowance exempts employers' national insurance liability below a threshold.  This allowance limit is £3,000 from April 2016.  However, the only director of a company is no longer entitled to the employment allowance.

 

 

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