National Insurance Contributions
Employees, employers and self-employed people pay National Insurance Contributions (NICs). You’ll pay NICs if you’re over 16 and earn more than £242 a week or have self-employed profits above £12,570. However, there are a few more details you should know about. 
Paying NICs allows you to build entitlement to benefits, such as your State Pension and Maternity Allowance. Some other benefits also depend on whether you have paid enough NICs. Many people don’t know they can voluntarily top up their NICs. 
 
The amount and type of NICs you pay depends on your: 
employment status 
age 
earnings 
residence. 
 

Paying NICs 

If you receive payments through a company payroll Pay As You Earn (PAYE) scheme your NICs are automatically deducted from your salary. This takes place for each pay period, so it could happen weekly or monthly, for example. If you earn extra, you’ll pay additional NICs. 
 
If you’re self-employed your NICs are included in your Self Assessment tax return and paid along with your Income Tax. 
 

Types of NICs 

Class 1 for employees and employers 
Class 2 if you’re self-employed 
Class 3 voluntary contributions 
Class 4 if you’re self-employed and have profits above the £12,570 Lower Profits Limit. 
 

NIC rates 

Employers pay Class 1 NICs at 13.8% for employees who earn over £175 per week in certain categories. Employees pay Class 1 NICs when they earn more than £242 per week. The rate is normally 12% for weekly earnings up to £967 and 2% over that amount. You don’t pay NICs once you reach State Pension age, which is currently 66. 
 
If you’re self-employed with profits of less than £6,725 (the Small Profits Threshold) you don’t pay NICs. You might choose to make voluntary payments to protect your National Insurance record. It’s a little more confusing if your profits are between £6,725 and £12,570 (Lower Profits Limit). You won’t pay Class 2 NICs but you’ll be treated as if you have. If your profits are over £12,570 you’ll pay Class 2 NICs at £3.45 per week or £179.40 for the whole year. We know this isn’t straight forward, so ask your bookkeeper about it. 
 
Additional voluntary Class 3 NICs can fill any gaps in your National Insurance payment record to help you receive a higher State Pension. To receive the new State Pension, you must have a minimum of ten qualifying years of NICs. To receive the full State Pension, you must have at least 35 qualifying years of NICs. For 2023/24, maximum weekly Class 3 contributions are £17.45. You’ll need to find out: 
if you can make payments towards any gaps in your records 
how much you’ll need to pay 
whether you would benefit from making voluntary NICs. 
 
If you’re self-employed and make more than £12,570 profit you’ll also pay Class 4 NICs. These are 9% on profits up to £50,270 and 2% above that amount. 
 

Topping up NICs 

You can make voluntary NIC payments at the 2022/23 rates until 05 April 2025. If you know you have gaps in your payment records from April 2006 you should check whether you will benefit from additional payments. 
 
After 05 April 2025 you can only make voluntary contributions for the previous six years. 
 
You can check your National Insurance record and get a State Pension forecast online. 
Please get in touch if you would like to discuss you NIC position as a company director or if you’re self-employed. 
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