National Insurance contributions are a tax on earnings and self-employed profits paid by employees, employers and self-employed.
It is essential that you make these contributions for two reasons:
- Helps to build your entitlement to certain benefits depending on whether you are employed, or self-employed, such as state pension and maternity allowance.
- Because payments of NI contributions establish entitlement to certain state benefits for workers and their families, it acts as a form of social security.
NI contributions are made through a national insurance number. This ensures that your payments are recorded against your name only, because it never changes. Contributions go to HM revenue and customs who keep a record of every individual payment.
So how do you know how much your meant to be paying?
There are different types of national insurance known as classes. The type you pay depends on your employment status and how much you earn. The classes are the following:
- Class 1: Employees earning more than a £242 a week and under state pension; automatically deducted by employer.
- Class 1A/1B: Employers pay these directly on their employee’s expenses or benefits.
- Class 2: Self- employed people earning profits of £12,570 or more a year.
- Class 3: Voluntary contributions paid to fill or avoid gaps on a national insurance record.
- Class 4: Self- employed people earning profits of £12,570 or more a year.
To conclude, national insurance payments are vital, because they protect your interest in the future. For more information, visit https://www.gov.uk/national-insurance.
