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National Insurance Contributions

National Insurance contributions

There are 4 different types of National Insurance that employees or the self-employed can pay and there is often a great deal of misunderstanding about who is to pay what type of National Insurance, and how the calculation of the liability comes about.

The following is a brief introduction to the various types of National Insurance that may be due.

Class 1

The is paid by employees only and for 2014/15 is payable at 12% on all earnings above £153 per week up to £805 per week, and at 2% on everything above £805 per week.  The monthly limits are £663 and £3,488.

Your employer will calculate and deduct the correct amounts from your wages and remit them to HMRC, and pay employers NI at a different rate.

Class 2

Anyone who is self-employed is liable to pay Class 2 National Insurance which is a flat rate charge for 2014/15 of £2.75 per week and this covers the basic level of benefits that you will receive if you are unable to work or are injured at work.

Self-employed share fishermen pay £3.40 per week for 2014/15 to reflect the less regular nature of their self-employment.

If you earn less than £5,885 for 2014/15 then you can opt not to pay Class 2 National Insurance, but this is usually only beneficial if you are receiving Child Benefit, as you are credited for National Insurance automatically by virtue of receiving Child Benefit.

Class 4

Class 4 National Insurance also applies only to the self-employed.

If you earn more than £7,956 from self-employment in 2014/15 then you are due to pay Class 4 National Insurance in addition to Class 2.  This is charged at 9% of your profits between £7,956 and £41,865 plus 2% of everything above this.

Class 3

Class 3 National Insurance is for voluntary contributions where someone has missed a year of contributions either because they were working outside the Uk or they were not working at all.

Again if you are receiving Child Benefit then your National Insurance should be paid automatically.

Upper limit

If you are employed and self-employed then you may pay Class 1, 2 & 4 National Insurance.  If the total payments are in excess of the upper limits, then HMRC will automatically refund the excess to you, but it is possible to defer some of the payments.  You will need specialist advice to compute the most you need to pay.

Further information

National Insurance TaxApp for Apple

Download for Apple

National Insurance TaxApp for Android

Download for Android

To get more information about National Insurance and the current rates that apply, you should download our free TaxApp from either the App Store or the Google Play Store.  The TaxApp also has full details of other taxes and allowances and is updated monthly with the latest news and details of any changes.

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