National Insurance (NI) is a tax on earnings and profits that funds the State Pension, contributory benefits (such as Jobseeker's Allowance and Employment and Support Allowance), and contributes to the NHS. Unlike income tax, NI contributions also build your personal entitlement to certain benefits and — most importantly for most people — the State Pension.
National Insurance Classes
NI Contribution Classes
| Class | Who Pays | How It Works |
|---|---|---|
| Class 1 | Employees | Deducted from salary by employer via PAYE |
| Class 1A/1B | Employers | Paid on employee benefits and expenses |
| Class 2 | Self-employed | Flat-rate weekly contribution paid via Self Assessment |
| Class 3 | Voluntary | Paid to fill gaps in your NI record |
| Class 4 | Self-employed | Percentage of profits paid via Self Assessment |
Class 2 and Class 4 contributions are both paid by the self-employed. Class 2 builds State Pension entitlement; Class 4 does not build any additional entitlement but is a tax on profits. Source: GOV.UK — National Insurance
Current NI Rates (2024/25)
Employee and Employer Rates
- Class 1 Employee
- 8% on £12,570–£50,270
- + 2% on earnings above £50,270
- Class 1 Employer
- 13.8% on earnings above £9,100
- (No upper limit)
- Class 4 Self-employed
- 6% on £12,570–£50,270
- + 2% on profits above £50,270
- Class 2 Self-employed
- £3.45/week
- (If profits above £6,725)
- Class 3 Voluntary
- £17.45/week
- (£907.40 per year)
The Primary Threshold for employees (£12,570) is aligned with the income tax personal allowance. Source: GOV.UK — NI rates
How NI Builds State Pension Entitlement
To receive the full new State Pension, you need 35 qualifying years of National Insurance contributions or credits. You need a minimum of 10 qualifying years to receive any State Pension at all. A "qualifying year" is a tax year in which you have paid or been credited with enough NI contributions.
For employees, each year where your earnings exceed the Lower Earnings Limit (£6,396 for 2024/25) counts as a qualifying year. For the self-employed, paying Class 2 NICs provides a qualifying year. People receiving certain state benefits (such as Child Benefit for a child under 12, Carer's Allowance, or Jobseeker's Allowance) receive National Insurance credits automatically.
Checking Your NI Record
You can check your National Insurance record online at GOV.UK. This shows how many qualifying years you have, any gaps in your record, and whether you can fill those gaps with voluntary contributions. The record is available to check at any time, and is particularly relevant for those who have had periods of self-employment, time abroad, or career breaks.
Filling Gaps with Voluntary Contributions
If you have gaps in your NI record, you may be able to fill them by paying voluntary Class 3 contributions at £17.45 per week (£907.40 for a full year). You can normally go back up to 6 years, though there are currently transitional arrangements allowing some people to fill gaps going back to April 2006 — check GOV.UK for the latest deadline.
Filling gaps is often very good value. Each additional qualifying year of State Pension is worth approximately £342 per year (1/35th of the full State Pension). Paying £907.40 for a Class 3 year gives you £342 per year for the rest of your life from State Pension age — typically paying for itself within three years.
NI and Salary Sacrifice
Under a salary sacrifice arrangement, both the employee and employer save National Insurance on the sacrificed amount, because it never forms part of the employee's pay. This is one of the key advantages of salary sacrifice over a normal pension contribution, where NI is still payable. See our salary sacrifice guide for a detailed worked example.
NI for Company Directors
Company directors have a different NI calculation method. Instead of the normal earnings period (weekly or monthly), directors are assessed on an annual earnings period. This means their NI is calculated on total annual earnings, which can produce a different result from the cumulative weekly/monthly calculations used for other employees. Many directors pay themselves a salary just below the Primary Threshold (£12,570) and take additional income as dividends, which are not subject to NI.
Married Women's Reduced Rate
Before 1977, married women could elect to pay a reduced rate of NI (known as the "small stamp" or "married women's reduced rate"). Those who elected this option and have continued to pay it are still entitled to do so, but it does not build State Pension entitlement. Women still on the reduced rate should consider whether it remains in their interest, as it can significantly reduce their State Pension. The election is lost if there is a break in employment of more than two consecutive tax years.
NI Above State Pension Age
Once you reach State Pension age, you no longer pay employee National Insurance contributions, even if you continue working. However, your employer still pays employer NI (Class 1 secondary contributions) on your earnings. This makes employing people above State Pension age slightly more expensive for employers. If you are self-employed, you stop paying Class 2 and Class 4 NI from the start of the tax year after you reach State Pension age.
For more on how NI relates to retirement income, see our retirement planning guide and self-employed pension guide.
This guide is for general information only and does not constitute financial advice. The information is based on publicly available data from HMRC and other government sources. Always seek professional advice before making financial decisions. Figures and thresholds are subject to change — check official sources for the latest values.