National Insurance: How Much Should You be Paying?21st July 2015
National Insurance (NI) is a scheme where working individuals make payments towards enjoying benefits. Administered by the HM Revenue & Customs, the NI contribution entitles to one of the most important benefits such as the state pension, amongst many other including bereavement benefits, maternity allowance, incapacity allowance, widowed parent’s allowance, employment and support allowance.
If you qualify as employed or self-employed, in the age category of 16 years or over but below the state pension age – you need to pay NI contribution (NIC). National Insurance is paid with your taxes. Every individual will own a unique NI number to pay the NIC, if you are employed; your employer may deduct it from your pay. This will appear on your pay slip highlighting the contributions. If you are self-employed, HM Revenue and Customs (HMRC) will send you a payment request every April.
National Insurance Classes
Each individual falls into one of the Classes, which depends on the status of your employment and your level of income.
- Class 1: The employer takes away the NIC off your wages prior to paying you. This is applicable for employees earning over GBP 155 weekly.
- Class 1 A: The employer pays on the value of the benefit in kind (non-cash benefits such as a mobile phone or a company car)
- Class 1 B: The employer pays upon the PAYE settlement agreement with HMRC. Thereby, pays your income tax due on certain benefits in kind.
- Class 2: Self-employed and making a profit of more than GBP 5,965 or more annually
- Class 3: The employee can pay to fill or avoid gaps in NI record. These are also known as voluntary contributions.
- Class 4: Self-employed and making a profit of more than GBP 8,060 or more annually
For added knowledge and convenience, we compiled set of quick and easy tools to work out the following:
- National Insurance Contributions (NIC) Calculator: Once you are eligible for NIC, visit this link to help you calculate your contribution.
- National Insurance Refund: It is easy to overpay if you are employed and self-employed in the same tax year. All you need to know is which class you belong (refer above) and visit this link to work it out.
- Class 1A National Insurance Contribution Reference: If you are an employee who receives benefits of kind, click over here.
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