CHANCELLOR Rishi Sunak announced in April 2020 that the amount paid towards National Insurance would be reduced in a boost for millions of British workers.
This saw Brits not have to start paying the tax until they earn £9,500 – up from £8,632. Here's everything you need to know about national insurance.
What is National Insurance?
National Insurance is a tax on your earnings.
Your National Insurance contributions are paid into a fund, from which some state benefits are paid.
This includes the state pension, statutory sick pay or maternity leave, or entitlement to unemployment benefits.
If you are a UK national, you should receive an NI number (and NI card) automatically before you turn 16.
This number allows the government to track your tax.
Who currently pays it?
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £166 a week
- self-employed and making a profit of £6,365 or more a year
It is deducted from your wages each month.
If you're employed, you can see how much you pay by looking at your pay slip.
Once you reach state pension age, you don't need to pay it at all.
There are different types of National Insurance (known as ‘classes’), and the type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.
Why do I need to pay it?
Paying National Insurance entitles you to some state benefits, though these vary according to your employment status.
You'll need to pay into National Insurance for a set number of years to be entitled to receive the state pension.
If you haven't met the minimum amount of contributions, you may not qualify for some benefits.
What are the thresholds and how much do I pay?
The threshold for National Insurance payments is £9,500.
This is a £100 tax cut for most people from the previous figure – but the Tories have pledged to raise the threshold to £12,500 by the mid-2020s, handing a £465 tax cut in total to the vast majority of the UK workforce.
The move is ultimately expected to take 2.4million people out of paying the tax altogether.
At the moment, most people pay 12 per cent on anything they earn up to £962 – needing to be taking home £183 a week before being able to contribute.
Anything you earn over £962 a week, you pay 2 per cent towards National Insurance.
For example, if you were to earn £1000 a week:
- You pay nothing on the first £183
- 12% up to £962, which equals £93.48
- Then 2% for the remaining £38, which equals £0.76 – leaving a total of £94.24
Earlier this year it emerged that servicemen's partners could be missing out on £250 in National Insurance credits – given to ensure that partners who were unable to work during those times do not miss out on entitlement to the State Pension.
Meanwhile, hundreds of thousands of newly-retired women are being urged to check whether they’re entitled to £129 a week as part of a “little-known” state pension boost, because of a scheme which began in the 1940s.
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