• Posted 2nd September 2015

National Insurance Categories

People working in the UK must know what National Insurance is and must have been paying it. However, to those of you who don’t have much knowledge on this subject; let me shed a light on this subject for you. National Insurance is a system of contributions made by the workers and employers to qualify for certain state benefits including the state pension. Thus, whether you are self-employed or employed, you first need to have a National Insurance number to pay such National Insurance Contributions (NICs). As there are the different classes of National Insurance, the type you pay depends on your employment status and earnings, and whether there is any gap in your National Insurance record. Employees who earn more than £115 a week and are under State Pension age pay National Insurance Class 1. A 12% Class 1 National Insurance rate is applied if your pay is £155 to £815 a week. And, if your pay is over £815 a week, a 2 % rate is applied. Employers pay Class 1A or 1B directly on their employee’s expenses or benefits. If you are self-employed, you need to pay Class 2 contributions. However, you don’t have to pay if you earn less than £5,965 a year, but you can choose to pay voluntary contributions. Class 3 National Insurance Contributions are voluntary contributions which you can pay to fill the gaps in your National Insurance record. If you are not working, not entitled to pay Class 1 or Class 2 contributions or you live overseas, then also you can pay these contributions. Class 3A is a voluntary contribution. This will be available from October 2015 if you are due to retire before 6 April 2016. Such contributions will be made in one-off lump-sum payment. If you are self-employed, you need to pay Class 4 contributions when your profits reach over £8,060 a year. Class 4 contributions are 9% of taxable profits between £8,060 and £42,385 in 2015-16.