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Although it’s important to note that NICs are made by employers as well as employees and self-employed professionals, this guide focuses on how much National Insurance you have to pay as a full or part-time employee and/or a self-employed individual. 

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 J 
    Employers allowed to defer NICs because they are paying it through another job e.g. self-employed income. 
  • Category H 
    Covers all apprentices under the age of 25. 
  • Category M 
    Covers all employees under the age of 21. 
  • 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. This is collected by HMRC through your self-assessment tax returns. If you earn under £6,515 from your self-employed income, 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 £3.05 per week if your profits are over £6,515 a 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 £15.40 a week in the 2021/22 tax year. 
  • Class 4 NICs 
    Class 4 NICs are also paid by self-employed professionals in addition to Class 2 NICs. However, these are only paid if your profits are over the Lower Profits Limit of £9,568 for the 2021/22 tax year. Class 4 NICs are also payable through self-assessment. This is usually calculated as 9% on your profits above the Lower Profits Limit. Any profits above the upper threshold of £50,270 are paid at an additional rate of 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  Bands for 2021/22 tax year 
Lower earnings limit  £120 per week 
£520 per month 
£6,240 per year 
Primary threshold  £184 per week 
£797 per month 
£9,568 per year 
Secondary threshold  £170 per week 
£737 per month 
£8,840 per year 
Upper secondary threshold (under 21s)  £967 per week 
£4,189 per month 
£50,270 per year 
Apprentice upper secondary threshold (under 25s)  £967 per week 
£4,189 per month 
£50,270 per year 
Upper earnings limit  £967 per week 
£4,189 per month 
£50,270 per year 

National Insurance rates 

The rates you pay NICs are calculated as a percentage of your overall weekly or monthly income. If you are an employee, your employer will deduct Class 1 NICs from your salary, which can also include commission, bonuses, overtime and sick or maternity/paternity pay. This is all dealt with via your payroll and HMRC. 

National Insurance rates can change from year to year, depending on the fiscal measures of the UK government, announced annually in the Budget. If you are wondering how much is National Insurance in the current tax year, read on as we compare the current 2021/22 tax year to the previous two tax years: 

NI rates 2021/22 

The current National Insurance rates for the 2021/22 tax year are as follows: 

Income Class 1 National Insurance rates
£184-£967 a week (£797-£4,189 monthly)  12%
Over £967 a week (£4,190+ monthly)  2%
Under £9,568 per annum 0%

NI rates 2020/21

The National Insurance rates for 2020/22 were as follows: 

Income Class 1 National Insurance rates
£183-£962 a week (£792-£4,167 monthly)   12%
Over £962 a week (£4,168+ monthly)  2%
Under £9,500 per annum  0%

NI rates 2019/20

The National Insurance rates for 2019/20 were as follows: 

Income Class 1 National Insurance rates
£166-£962 a week (£719-£4,167 monthly)    12%
Over £962 a week (£4,168+ monthly)  2%
Under £8,632 per annum   0%

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: 

Category £520-£737 per month income  £737.01-£4,189 per month income  £4,189.01+ per month income 
A 0% 13.8% 13.8%
B 0% 13.8% 13.8%
C 0% 13.8% 13.8%
H 0% 0% 13.8%
J 0% 13.8% 13.8%
M 0% 0% 13.8%
Z 0% 0% 13.8%

Employers should be mindful of the employment allowance, which enables some business owners to minimise the amount of employer NICs payable – up to the allowance limit of £4,000 per year. This reduction is available exclusively to small businesses with total NIC bills of less than £100,000. 

All employers 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 are employing staff for the first time, we can help you negotiate the employment law minefield and ensure you are doing everything by the book. 

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

If your self-employed profits are less than £6,515 per annum, you will not be obliged to pay Class 2 NICs. Anything higher will trigger Class 2 NICs, paid at £3.05 a week for the 2021/22 tax year. 

Self-employed profits above £9,568 in the 2021/22 tax year will also incur Class 4 NICs, paid at 9% on profits above this threshold. Profits above £50,000 in 2021/22 will be paid at an additional 2% rate. 

While most self-employed professionals will pay their NICs via self-assessment tax returns, 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 on a full or part-time basis and you earn a self-employed income on the side, you will pay Class 1 NICs through your employed income and Class 2 and Class 4 NICs on your self-employed income. 

You will be required to submit a self-assessment tax return annually to report your self-employed income, as well as your employed income using your P60 form. 

Can you pay too much National Insurance? 

It is possible to overpay with your National Insurance payments. If you have continued to pay NICs after reaching the state pension age, this is considered an overpayment. In addition, if you have multiple jobs or are employed and self-employed on a high income – and did not apply for deferment – the chances are you will have overpaid your NICs. 

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, your local TaxAssist Accountant 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 01282 864 228 or drop us a line using our online enquiry form

Date published 17 Jun 2021 | Last updated 17 Jun 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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