How much National Insurance do I pay?

This comprehensive guide looks at National Insurance for individuals and employees, the rates applicable and how much they should expect to pay.

How is National Insurance calculated? 

As a full or part-time employee, you will have a National Insurance category letter which employers use when submitting payslips and handling their payroll. This helps employers to calculate how much you both need to contribute. Most employees are in category A. However, there are additional categories that you could find yourself placed depending on your individual situation, including: 

• Category B 
  Covers all married working women and widows entitled to pay reduced National Insurance. 
• Category C 
  Covers all employees over the current State Pension age. 
• Category H 
  Covers all apprentices under the age of 25. 
• Category J 
  Employers allowed to defer NICs because they are paying it through another job e.g. self-employed income. 
• Category M 
  Covers all employees under the age of 21. 
• Category V
  Covers employees working in their first job since leaving the armed forces (veterans)
• Category Z 
  Covers all employees under the age of 21 that can defer NICs because they are paying it through another job. 

In addition, there are different ‘classes’ of NICs that you must pay, depending on your income situation: 

• Class 1 NICs 
  All employees pay Class 1 NICs. This is taken from your pre-taxable income before you are paid. Employers must also pay Class 1 NICs based on your earnings. 
• Class 2 NICs 
  Class 2 NICs are reserved for self-employed professionals. If your profits are £6,725 or more you do not have to pay Class 2 NICs but you will be treated as having paid them to protect your National Insurance record. If your profits are under £6,725 you will not be liable for Class 2 NICs, under the Small Profits Threshold. You can still pay Class 2 NICs voluntarily if you wish. This is beneficial to build up contributions to your state pension. Class 2 NICs are £3.45 per week for the 2024/25 tax year. 
• Class 3 NICs 
  Class 3 NICs are reserved for those who do not pay Class 1 or Class 2 NICs and aren’t in receipt of National Insurance credits. By paying Class 3 NICs, you are preserving your rights to certain state benefits. This costs £17.45 a week in the 2024/25 tax year. 
• Class 4 NICs 
  Class 4 NICs are paid by self-employed professionals. However, these are only paid if your profits are over the Lower Profits Limit of £12,570 for the 2024/25 tax year. HMRC collects Class 4 NICs through self-assessment tax returns. You pay Class 4 NICs at 6% on profits between the Lower Profits Limit (£12,570) and the Upper Profits Limit (£50,270). You pay contributions on profits above the Upper Profits Limit at 2%. 

What is the NI threshold? 

There is a National Insurance threshold for paying Class 1 National Insurance. In fact, there are six thresholds for paying Class 1 NICs. You must only pay NICs on earnings above the lower earnings limit. 

Class 1 NIC thresholds	Monthly	Weekly
Lower Earnings Limit	£533	£123
Primary Threshold	£1,048	£242
Secondary Threshold	£758	£175
Upper Earnings Limit	£4,189	£967
Upper Secondary Threshold	£4,189	£967
Apprentice Upper Secondary Threshold	£4,189	£967

 

National Insurance rates 

The rate of NIC you pay is a percentage of your overall weekly or monthly income. Your employer will deduct Class 1 NICs from your pay. 

The government announces the annual changes to National Insurance rates each year in the Budget. If you are wondering how much National Insurance Contributions for employees are in the current tax year, read on: 

From 6th April 2024 to 5th April 2025

Income (monthly)	Class 1 NIC rate
£1,048 - £4,189	8%
Above £4,189	2%

 

How much NI does an employer pay? 

Employers’ National Insurance contributions are covered under ‘secondary’ Class 1 contributions. The ‘primary’ contributions being the employees’ National Insurance contributions. Both are collected by HMRC through the Pay As You Earn (PAYE) system. 

How much an employer pays in Class 1 NICs depends on their employees’ salary and their NI category letter: 

Income (monthly)	Class 1 (secondary) NIC rate
Above £758	13.8%

Employers can use the employment allowance to lower their National Insurance payments by up to £5,000 per year. This reduction is available exclusively to small businesses with total NIC bills of less than £100,000. 

All employees under the age of 21 and apprentices under the age of 25 are exempt from employer Class 1 NICs, unless they earn £4,189.01 a month or higher. 

If you're hiring staff for the first time, we can assist you in navigating employment laws and ensuring compliance. 

How much National Insurance do I pay if I am self-employed? 

From April 2024, if your self-employed profits are £6,725 or more per annum, you will be treated as having paid Class 2 NICs to protect your National Insurance record. You do not have to make any Class 2 NIC payments. If your profits are less than £6,725 per annum, you can choose to make voluntary Class 2 NIC payments.

Those with self-employed profits above £12,570 in the 2024/25 tax year will also incur Class 4 NICs, paid at 6% on profits above this threshold. NICs are payable at a rate of 2% on profits above £50,270 in 2024/25. 

There are some who may opt to make voluntary contributions instead. Religious ministers, exam invigilators, investors and property business owners are exempt from Class 2 NICs, but these individuals may not qualify for certain state benefits like a state pension if they do not make sufficient contributions. That’s where voluntary NICs come in to play – allowing exempt individuals to make up any missing years if necessary. 

If you are both employed and self-employed 

If you are employed and self-employed, you will pay: 

• Class 1 NICs through your employed income 
• Class 4 NICs, and possibly Class 2 NICs on your self-employed income 

Every year, you must send a self-assessment tax return to declare your earnings from self-employment and employment. 

Can you pay too much National Insurance? 

You can overpay National Insurance Contributions. Some examples are: 

• you have continued to pay NICs after reaching the state pension age 
• you have multiple jobs 
• you have employment and self-employment, with a high income and did not apply for deferment 

Fortunately, it is easy to claim National Insurance rebates. In fact, you can claim refunds for all four classes of NICs, using the GOV.UK website’s intuitive tool. 

How we can help 

If you still require clarification on your National Insurance situation from a qualified and trustworthy professional, at TaxAssist Accountants we will be happy to help with your bookkeeping. We can go through your self-employed and/or employed income to determine the appropriate NI rates for you. 

For a free initial consultation, call our friendly and experienced team today on 01737 420 490 or drop us a line using our online enquiry form. 

Last updated: 10th April 2024