What is National Insurance and what is the current threshold?

MILLIONS of workers are having to pay into National Insurance (NI) to cover the cost of state benefits.

You usually start paying taxes when you turn 16 and earn above a certain amount.

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But if you don’t pay the taxes, you could lose out financially later.

Here’s everything you need to know.

What is National Insurance?

national insurance is a tax on your income and goes to state benefits, including the state pension, statutory sick pay, maternity leave and unemployment benefits.

British nationals should automatically receive an NI number and card before they turn 16, although you may sometimes need to apply for one.

This allows the government to track your income and apply the correct amount of tax.

The contributions go to a government pot in which benefits such as sick pay and the state pension are paid.

This means that you will receive part of the National Insurance premiums (NIC) back.

What salary will you start paying National Insurance?

If you are employed, you start paying National Insurance if you are aged 16 or over and earn more than £242 a week.

You start paying NICs when you earn more than £12,570 a year – the same threshold as for income tax.

Self-employed people start paying when they make a profit of at least £6,725 per year.

Those who earn less than these amounts do not have to pay national insurance.

If you are employed and have self-employment income, you may have to pay NICs for both amounts if you exceed these amounts.

If you are self-employed, you will need to complete a tax return and pay your own NICs and income tax.

Once you reach state pension age, you no longer have to pay it at all.

There are different types of national insurance, known as ‘classes’, and the type you pay depends on your employment status, how much you earn and whether there are any gaps in your national insurance file.

Why do I have to pay it?

If you pay national insurance, you are entitled to certain government benefits, although these vary depending on your employment status.

If you do not meet the minimum premium amount, you may not be eligible for certain benefits.

For example, you need at least ten years of contributions to receive an AOW benefit at all, and 35 years to receive the full amount.

You can check how much National Insurance you have paid via Government Gateway Portal. You will need a login and password for this.

If you don’t have a login for the Government Gateway portal, you can set one up, but you’ll need your social security number to do so.

If you are employed, your contributions are automatically deducted from your net salary. Opt-out is therefore not possible in any case.

However, self-employed people must pay NI on their tax return.

How much should I pay?

Most people now pay 10% NICs on all earnings between £242 and £967 per week.

This means that if you earn more than £12,570 per year, you will start paying NICs.

You pay the mandatory National Insurance if you are 16 years or older and:

• An employee who earns more than €242 per week from one job
• Self-employed and making a profit of over £12,570 per year

In addition, you must pay 2% on anything you earn over £967 per week, or £4,189 per month.

The exact amount you pay depends on how much you earn, as it is a percentage of income between these amounts.

If you are employed, the company you work for will withhold the tax and pay it to HMRC for you.

You can see your contributions by looking at your pay slip.

Your Citizen Service Number is used to ensure that the correct premiums are paid into your name.

You can also visit use HMRC’s NIC calculator to see how much you pay.

How do the rates change?

Rates fell from 12% to 10% in January 2023 after Jeremy Hunt cut the rate for Class 1 NICs.

This change has helped 27 million workers and meant that someone earning an average salary of £35,000 will save over £450 a year.

The Chancellor announced a further two percentage point cut for Class 1 NICs during his Spring Budget in March.

The change means that someone earning an average salary of €35,000 will save more than €448.60 per year.

This rises to a maximum of around £750 for those on salaries above £50,000.

The legislation is being brought forward to allow the reduction from April 6, the start of the next tax year.

Combined with the two percentage point cut for NI that came into effect in January, this will result in a total saving of around £900 per year.

Two million self-employed people will have their national insurance headline rate cut from 8% to 6%, meaning an average saving of £350 per year.

The exact amount you save depends on how much you earn.

Can I check how much National Insurance I have paid?

You can check how much National Insurance you have paid by visiting https://www.gov.uk/check-national-insurance-record.

You will need a login and password for this.

If you don’t have a login for the Government Gateway portal, you can set one up, but you’ll need your social security number to do so.

You can check how much premium you have paid in the current financial year and how many National Insurance discounts you have received.

However, on this portal you will not receive an estimate of how much AOW you are entitled to.

If you prefer, you can also request a paper version with an overview of your contributions.

Can I unsubscribe from National Insurance?

Because National Insurance is automatically deducted from your wages, you cannot opt ​​out if you are employed or self-employed, are 16 years or older and earn above the minimum limit.

However, self-employed people must manage these payments themselves.

If you become self-employed, you must tell HMRC as soon as possible.