Understanding National Insurance
Background to National Insurance contributions
Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man – may have a liability to pay National Insurance contributions. You may be liable to pay National Insurance contributions if you:
o Work for an employer (an employed earner), and pay Class 1 National Insurance Contributions
o Work for yourself (self employed), and pay Class 2 and Class 4 National Insurance Contributions.
The amount of contributions you have to pay will depend on whether you are an employed earner or self employed; and the amount you earn. There may be occasions when you may work for an employer and for yourself at the same time. In these instances you may have to pay more than one class of contribution.
Someone who is not liable to pay National Insurance contributions may be able to pay certain contributions on a voluntary basis (typically Class 3 National Insurance contributions). These contributions are payable to safeguard or enhance assistance entitlement for Basic State Pension and Bereavement Benefits.
Anyone who is over State Pension age does not have to pay Class 1 or Class 2 National Insurance contributions, except on earnings that should have been paid before State Pension Age.
Employer’s secondary Class 1 National Insurance contributions are nevertheless due and are payable at the not contracted-out rate, already if the employer operates a contracted-out scheme.
The evidence held by an employer to prove that a person is over State Pension age and not liable for contributions is a CA4140/ CF384 ‘Certificate Of Age Exception’.
To apply for an Age Exemption Certificate please contact:
HM Revenue & Customs
National Insurance Contributions Office (NICO)
Newcastle upon Tyne
Employers must also pay National Insurance contributions for each person they use who is aged 16 or over and whose earnings are above the defined thresholds.
This is paid at a rate of 12.8%.
Here is a summary of the six different classes of National Insurance contributions used in the UK
Paid by people who work as employed earners, and their employers.
Paid only by employers who provide certain directors and employees with
benefits in kind which are obtainable for private use, for example, cars and fuel.
Paid only by employers who go into into a Pay As You Earn (PAYE) Settlement
Agreement (PSA) with HM Revenue & Customs for tax purposes.
Paid by people who are self employed.
Voluntary contributions paid by people who wish to protect their entitlement to the State Pension and who do not pay enough National Insurance contributions in
typically paid by self-employed people in addition to Class 2. Class 4
contributions do not count towards benefits.