National Insurance Contributions Explained: UK Guide 2025
National Insurance Contributions Explained: UK Guide 2025
National Insurance (NI) is a UK tax that funds state benefits including the State Pension, Jobseeker's Allowance, and Maternity Allowance. Here's everything you need to know about NI contributions.
What is National Insurance?
National Insurance is a tax on earnings that entitles you to certain state benefits. Unlike income tax, NI contributions are based on weekly or monthly earnings, not annual income.
NI Classes
There are different classes of National Insurance:
- Class 1: Employees earning above the Primary Threshold
- Class 2: Self-employed with profits above £6,515/year
- Class 3: Voluntary contributions to fill gaps
- Class 4: Self-employed with profits above £12,570/year
Employee NI Rates 2025/26
Class 1 Contributions
| Earnings Band | Rate | Weekly Threshold | Monthly Threshold |
|---|---|---|---|
| Lower Earnings Limit | 0% | Up to £123 | Up to £533 |
| Primary Threshold | 0% | £123 - £242 | £533 - £1,048 |
| Standard Rate | 8% | £242 - £967 | £1,048 - £4,189 |
| Additional Rate | 2% | Over £967 | Over £4,189 |
Example Calculations
£30,000 Annual Salary
- Monthly earnings: £2,500
- Above Primary Threshold: £2,500 - £1,048 = £1,452
- NI at 8%: £1,452 × 8% = £116.16/month
- Annual NI: £1,393.92
£50,000 Annual Salary
- Monthly earnings: £4,167
- Standard rate band: £4,189 - £1,048 = £3,141
- NI at 8%: £3,141 × 8% = £251.28
- Additional rate band: £0 (below upper threshold)
- Monthly NI: £251.28
- Annual NI: £3,015.36
£60,000 Annual Salary
- Monthly earnings: £5,000
- Standard rate band: £4,189 - £1,048 = £3,141
- NI at 8%: £3,141 × 8% = £251.28
- Additional rate band: £5,000 - £4,189 = £811
- NI at 2%: £811 × 2% = £16.22
- Monthly NI: £267.50
- Annual NI: £3,210
Self-Employed NI
Class 2 Contributions
- Fixed weekly rate: £3.45/week
- Only if profits exceed £6,515/year
- Annual cost: £179.40
Class 4 Contributions
- 6% on profits between £12,570 - £50,270
- 2% on profits above £50,270
Example: £40,000 Self-Employed Profit
- Class 2: £179.40/year
- Class 4: (£40,000 - £12,570) × 6% = £1,645.80
- Total NI: £1,825.20
NI vs Income Tax
Key differences:
| Aspect | Income Tax | National Insurance |
|---|---|---|
| Threshold | £12,570/year | £1,048/month (£12,570/year) |
| Calculation | Annual | Weekly/Monthly |
| Rate | 20%, 40%, 45% | 8%, 2% |
| Purpose | General taxation | State benefits |
State Pension Entitlement
To qualify for the full State Pension, you need:
- 35 qualifying years of NI contributions
- Minimum 10 years to receive any State Pension
- Full rate: £221.20/week (2025/26)
Qualifying Years
- Paying Class 1 NI (employed)
- Paying Class 2 or 4 NI (self-employed)
- Receiving certain benefits
- Credits for caring responsibilities
NI Credits
You can receive NI credits for:
- Caring for children under 12
- Caring for a disabled person
- Receiving certain benefits
- Being a foster carer
Employer Contributions
Employers also pay NI:
- 13.8% on earnings above Secondary Threshold (£758/month)
- This is separate from employee contributions
- Doesn't affect your take-home pay
Reducing NI Contributions
Salary Sacrifice
- Pension contributions via salary sacrifice reduce NI
- Both employee and employer save NI
- Can increase take-home pay
Employment Allowance
- Small employers can claim up to £5,000/year
- Reduces employer NI bill
- Doesn't affect employee NI
NI and State Benefits
NI contributions entitle you to:
- State Pension
- Jobseeker's Allowance
- Employment and Support Allowance
- Maternity Allowance
- Bereavement Support Payment
Using Our Calculator
Our UK Salary Calculator automatically calculates National Insurance contributions based on your salary. See exactly how much NI you'll pay and your take-home pay.
Checking Your NI Record
- Check online: HMRC Personal Tax Account
- View your NI record
- See gaps in contributions
- Pay voluntary contributions if needed
Common Questions
Do I pay NI after State Pension age?
- No, you stop paying Class 1 NI at State Pension age
- You may still pay Class 4 if self-employed
What if I have gaps in my NI record?
- You can pay voluntary Class 3 contributions
- Check if it's worth paying to fill gaps
- Some gaps may be covered by credits
How does NI affect my take-home pay?
- NI is deducted before you receive your salary
- Use our calculator to see the exact impact
- Higher earners pay proportionally less NI (2% rate)
Important: National Insurance rates and thresholds are reviewed annually. Always check the latest HMRC guidance for current rates.