What are National Insurance Contributions? 

Payment of National Insurance contributions (NICs) – often shortened to just National Insurance – entitles people to various UK state benefits. You need a National Insurance number (which is made up of two letters, six numbers and a final letter) to ensure that your NICs and tax are recorded against your name and not someone else’s.  

There are different classes of National Insurance. Employees pay Class 1 NICs, which are 8% if you earn £242 to £967 a week (£1,048 to £4,189 a month) and 2% over £967 a week (£4,189 a month).  

Employers pay a different rate of National Insurance, depending on their employees’ National Insurance category letter. Class 1A and 1B NICs can also be payable on employee work benefits (e.g. company car or mobile phone). Class 1A NICs are also payable on payments of £30,000-plus made to employees when their employment is terminated (e.g. following redundancy).    

By law, you must pay National Insurance contributions if you’re 16 or over and you’re an employee earning more than £242 per week from one job or you’re self-employed and making a profit of more than £12,570 a year (2024/25 tax year). 

If you’re either an employee earning £123-£242 a week from one job or self-employed and your profits are £6,725 or more a year, you usually do not pay National Insurance, but may still qualify for certain benefits and the State Pension, Your contributions are treated as having been paid to protect your National Insurance record. 

• Self-employed people (i.e. sole traders) earning more than £12,570 a year (2024/25 tax year) pay Class 4 NICs via Self Assessment.  

• If their profits are £6,725 or more, their Class 2 NICs are considered paid to protect their National Insurance record. 

Self-employed people may be able to pay voluntary contributions to avoid gaps in their National Insurance record, so that their State benefits are protected.