National Insurance (NI) is a social security program for funding critical public services, such as the National Health Service (NHS) and State Pensions. It also helps determine entitlement to certain state benefits like Jobseeker’s Allowance (JSA) in Northern Ireland. NI represents the second-largest tax stream in the United Kingdom, following the income tax, thanks to contributions from employers, employees, and self-employed workers. National Insurance Contributions (NICs) made during an individual’s working life determine their eligibility for NI benefits.
What is a National Insurance number?
A national insurance number is a unique identifier used to ensure that your National Insurance contributions and related taxes are recorded correctly against your name. It comprises two prefix letters, six numbers and a suffix letter.
Every person living in the UK gets their NI number a few months before their 16th birthday provided their parent(s) or guardian(s) fills out a Child Benefit claim form on time. Once assigned, your NI number remains unchanged throughout your life.
You can find your NI number though:
- A personal tax account
- An online service
- The HMRC app
- Documents such as payslips, P60, P45, or CA5403
- Contacting HMRC
How to apply for an NI number
You can apply for an NI number if you:
- Live in the UK
- Have the right to work in the UK
- Are looking for work in the UK
- Have a job offer in the UK
You can apply for an NI number online. Required documents include either:
- Your passport
- A national identity card from an EU country, or fromLichtenstein, Switzerland, or Norway
You’ll have to prove your identity as part of your application; the easiest way to do so is by taking a photo of yourself holding your passport or other identity document using a smartphone, tablet, or digital camera. You can also take photos of your documents alone, if you aren’t able to take a photo of yourself holding them, or submit your application without any photos, but this may delay its processing time.
You can apply for your NI online. It can take up to four weeks to get your number after proving your identity.
National Insurance classes
The UK National Insurance system characterizes contributions into various classes based on employment status and earnings.
Employers automatically deduct Class 1 contributions from an employee’s pay if the employee:
- Earns over £242 per week from one job
- Is under the State Pension age
Those who earn less than £123 can pay voluntary Class 3 contributions to fill gaps in the NI record.
Self-employed individuals can pay Class 2 contributions as part of their self-assessment tax bills. Their NIC requirements may depend on their yearly profits. For example:
- Those earning less than £6,725 a year can opt for paying voluntary Class 2 contributions
- Those earning more than £12,570 are required to pay Class 4 contributions
Unemployed individuals can opt for voluntary Class 3 contributions to fill gaps in their NI records.
Employee National Insurance contributions
Workers in the UK (England, Scotland, and Wales) aged 16 and above and required to make NI contributions if:
- Their weekly earnings from one job are over £242, or
- They are self-employed with yearly profits exceeding £12,570
National Insurance rates for employees changed in 2024:
- Initially reduced from 12% to 10% and again to 8% in April of 2024 for earnings between the Primary Threshold (£242 per week) and the Upper Earnings Limit (£967 per week)
- Earnings above the Upper Earnings Limit are subject to a 2% rate
- For self-employed individuals subject to Class 4 contributions, the main rate fell from 9% to 6%
Some workers are not required to pay NI contributions but may still qualify for certain benefits. These include:
- Those earning between £123 and £242 per week from one job
- Self-employed individuals with yearly profits between £6,725 and £12,570
What are voluntary NI contributions, and who can pay them?
Voluntary NI contributions allow individuals to fill gaps in their National Insurance records. These gaps can occur if a person is:
- Unemployed
- A low-income employee
- A self-employed worker with low profits
- Located outside the UK
Gaps in NI contributions can affect a person’s ability to accumulate the qualifying years needed to receive the State Pension or certain social benefits. For this reason, it is advisable to regularly check your National Insurance record balance or determine whether you qualify for National
Insurance credits before making voluntary contributions.
Also, if a person believes there are inaccuracies in their IN record, they should contact HM Revenue and Customs for clarification. To learn more about voluntary NI contributions, visit gov.uk.
Employer National Insurance contributions
Employers in the UK are required to pay secondary Class 1 contributions on employees’ earnings above a certain threshold. For the 2024/2025 tax year, employees contribute 13.8% on employee earnings exceeding £175 per week, or £9,100 annually.
When do National Insurance contributions end?
Employees making Class 1 contributions stop paying NI once they reach the State Pension age. Self-employed individuals stop paying Class 4 contributions at the start of the tax year (April 6) after they reach the age qualifying them for State Pension.
FAQs about National Insurance
How does National Insurance impact labour costs?
NI contributions can significantly impact labour costs. Employers are required to make Class 1 contributions for their employees, and these expenses can affect their financial decisions and allocation of resources.
Can labour-intensive sectors benefit from any National Insurance relief?
Yes, job providers in labour-intensive sectors can benefit from National Insurance relief to help them reduce operational expenses. One of the most beneficial is the Employment Allowance, which allows eligible employers to reduce their NI contributions by up to £5,000 annually. This relief helps lower labor costs, making it easier for businesses to hire and retain staff.
What are National Insurance credits?
Some people who don’t make National Insurance contributions receive credits instead. This often includes those who are:
- Looking for work
- Unable to work due to an illness or disability
- Carers for others
- On maternity, paternity or adoption pay
Who can answer questions about National Insurance?
The HM Treasury and HM Revenue and Customs offer a number of ways to make National Insurance enquiries:
- Online, using HMRC’s digital assistant
- The HMRC helpline:
- By telephone: 0300 200 3500
- By textphone: 0300 200 3519
- From outside the UK: + 44 191 203 7010
Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.