How much is National Insurance?

National Insurance is a tax paid by employees, employers and those who are self-employed. But how much is National Insurance? Let’s explore.

Calculator with documents with the text “How much is National Insurance” and The Motley Fool jester cap logo

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

National Insurance is a tax that applies to earnings as well as profits from any self-employment. So how much is National Insurance? And how do you pay the tax? Let’s explore.

How much is National Insurance?

The amount of National Insurance you pay depends on your income, or business profits.

Employee contributions

If you’re an employee, you pay Class 1 National Insurance contributions as long as you earn over the earnings threshold.

For the 2021/22 tax year, you pay 12% on earnings between £184 and £967 per week (£797 to £4,189 a month). You pay 2% on anything over the upper threshold. Contributions are taken automatically from your monthly pay.

Self-employed contributions

If you’re self-employed, you pay either Class 2 or Class 4 contributions. This depends on how much profit you make in a year.

If you make more than £6,515 in a year, but less than £9,569, you pay Class 2 contributions. This is £3.05 a week.

If you make profits of £9,569 or more in a year, then you pay Class 4 contributions of 9% on profits up to £50,270, and 2% on anything above this figure.

If you earn less than £6,515, you don’t have to pay any National Insurance. However, as your entitlement to a number of state benefits, including the State Pension, is based on years of qualifying contributions, you can make voluntary contributions to protect your record. These are Class 3 contributions.

Employer contributions

National Insurance doesn’t just apply to employees, the tax also applies to employers. These are Class 1, 1A and 1B contributions.

The amount payable depends on profits made by the employer. To find out more about employer contributions, you can visit the website.

How much will National Insurance be in 2022/23?

On 8 September 2021, MPs voted through the health and social care levy, which will increase National Insurance by 1.25% from the 2022/23 tax year. From 2023, it will become a separate tax on income.

The government says this extra tax will help to fund the NHS and social care. To read more on this, see our article explaining what the new health and social care levy means for you.

Who is exempt from paying National Insurance?

You don’t have to pay National Insurance if you are under 16.

You also don’t have to make any contributions if you are over State Pension age, as long as you aren’t self-employed and making Class 4 contributions. If this applies to you, you can stop making these payments at the end of the tax year in which you reach State Pension age.

State Pension age is currently 66, though it will increase to 67 by 2029. Another rise to 68 is due by 2039.

You also don’t need to make any contributions if you make less than £184 per week. However, if you do make less than £184, you’re still treated as though you are making contributions, even though you aren’t liable to pay.

Can I stop paying National Insurance after I’ve made 35 years of payments?

In order to access the full State Pension, you must have made at least 35 years of qualifying National Insurance contributions. If you’ve made fewer, you’ll still receive a proportion of the State Pension as long as you’ve made at least 10 years of contributions.

That being said, even if you’ve made 35 years of payments, you can’t opt-out of the tax if you are under the current State Pension age.

While this may seem unfair, it’s believed that the treasury raises around £125 billion a year from contributors who have already made at least 35 years of payments.

Other tips for boosting retirement income

If you’re nearing retirement age, you may be interested in our articles that explore how you can boost your State Pension and other ways to boost your retirement income.