Working throught the NIC maze
NIC’s – why pay it ?
You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension. The contributions you pay depend on how much you earn and whether you’re employed or self-employed. You stop paying National Insurance contributions when you reach State Pension age.
(If you are self-employed, you stop paying Class 2 contributions as soon as you reach State Pension age and Class 4 contributions from the start of the tax year after the one in which you reach State Pension age.)
State Pension age is 65 for men born before 6 December 1953 and 60 for women born before 6 April 1950. State Pension age for women born on or after 6 April 1950 is gradually increasing and will reach 65 in November 2018. From December 2018, State Pension age for women and men will gradually increase from 65 and reach 66 by October 2020.
How much National Insurance you pay
The amount and type of National Insurance contributions you pay depend on whether you’re employed or self-employed and how much you earn. The rates shown below are for the 2018-2019 tax year.
If you’re employed
If you’re employed you pay Class 1 National Insurance contributions. The rates are (from 1st April 2018 for the 2018/2019 tax year):
* if you earn more than £162 a week and up to £892 a week, you pay 12 per cent of the amount you earn between £162 and £892 (or £8,424 per year to £46,350)
* if you earn more than £892 a week, you also pay 2 per cent of all your earnings over £892 (or £46,350 per year)
You pay a lower rate if you’re a member of your employer’s contracted-out pension scheme.
Your contributions are deducted from your wages by your employer.
If you’re self-employed
If you’re self-employed you pay Class 2 and Class 4 National Insurance contributions. The rates are:
* Class 2 National Insurance contributions are paid at a flat rate of £2.95 a week (from 1st April 2018 for the 2018/2019 tax year)
* Class 4 National Insurance contributions are paid as a percentage of your annual taxable profits – 9 per cent on profits between £8,424 and £46,350, and a further 2 per cent on profits over that amount.
If your profits are expected to be less than £6,205 you may not have to pay Class 2 National Insurance contributions. Your Class 2 National Insurance contributions payments are due on your Self Assessment tax bill.
Please note that Class 2 NIC’s will be scrapped from April 2019.
You pay Class 4 National Insurance contributions when you pay your Income Tax
Voluntary National Insurance contributions – called “Class 3” NIN
You can pay voluntary contributions (usually Class 3 National Insurance contributions) at a flat rate of £14.65 a week. Class 3 voluntary contributions are paid either monthly by Direct Debit or by quarterly bill. But if you have gaps in your National Insurance contributions record you can make one-off payments of voluntary contributions to fill these.
Checking your National Insurance contributions record
HMRC keeps records of your National Insurance contributions paid throughout your working life. Find out how to check your National Insurance record by following the link below.
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