National Insurance

National Insurance

Contribution classes
  • Class 1 - payable on employment earnings. Class 1 primary contributions are payable by the employee on their earnings at the rates shown in the table below, and Class 1 secondary are paid by the employer. The contributions are payable and accountable for under the PAYE system.
  • Class 1A - payable by employers only on the value of benefits in kind provided to its employees. The rate is the same as the main Class 1 (secondary) rate. Contributions are payable by 19 July following the end of the tax year to which they relate.
  • Class 1B - effectively the same as Class 1A contributions, and payable at the same rate as secondary contributions except that they apply where the employer pays the tax liability usually due from an employee on benefits in kind. Class 1B NI is payable by 19 October after the tax year. Note that you can not apply for a PAYE Settlement Agreement (PSA) for 2019/20 later than 5 July 2020. As a PSA has to be approved by HMRC by that date, the deadline for application is in practice somewhat earlier.
  • Class 2 - payable by the self-employed at the flat rate shown in the table below. If their profit is below the “small earnings exception” limit, an exception from paying Class 2 can be applied for.
  • Class 3 - voluntary contributions payable at a flat rate as shown in the table below. Contributions of this class can be paid by individuals who wish to top up their contribution record.
  • Class 4 - payable by the self-employed at the rates shown in the table below. The amount payable is profit related. Contributions at the full rate don’t apply to profits in excess of the “upper profits limit”. The rate of contribution is 2% of all profits above this limit.
Notes on Class 1 contributions:
  • The full rate of primary contributions is capped by an “upper earnings limit” (see the table below) above which the rate of contribution is reduced to 2% of earnings. Secondary contributions are due at the full rate on all earnings.
  • Contracted-out rates - until 6 April 2016 the rate of Class 1 contributions was reduced if the employer operates a contracted-out pension scheme. But where an employee contracted out of the state pension scheme through their own personal pension arrangement, the reduction in Class 1 was until 5 April 2012 achieved by a rebate of contributions from HMRC paid directly into the pension fund of the individual concerned. In this event the full rate Class 1 contributions continue to be due.
  • Since 6 April 2014 almost every business, charity and CASC has been able to deduct employment allowance from their (annual) employers’ NI liability. From 6 April 2016 the allowance was increased to £3,000 and to £4,000 from 6 April 2020. There are some exceptions, e.g. companies with a single director and no other employees (from 6 April 2016), employers engaging personnel for personal, household or domestic work, employers already claiming EA through a connected company or charity, a public authority etc.
  • Budget 2021. The basic rate band will be frozen at £37,700 until 5 April 2026. This means that the higher rate threshold will kick in at £50,270 when considering the personal allowance. The upper limits for Class 1 and Class 4 NI will remain aligned to this.
Description
2019/20
2020/21
2021/22
Lower earnings limit, primary Class 1 (per week)
£118
£120
£120
Upper earnings limit, primary Class 1 (per week)
£962
£962
£967
Primary threshold (per week)
£166
£183
£184
Secondary threshold (per week)
£166
£169
£170
Upper secondary threshold for under 21s (per week)
£962
£962
£967
Apprentice upper secondary threshold for under 25s
£962
£962
£967
Employees up to the primary threshold and employers up to the secondary threshold.
0%
0%
0%
Employees’ Class 1 rate between primary threshold and upper earnings limit
12%
12%
12%
Employees’ Class 1 rate above upper earnings limit
2%
2%
2%
Married women’s reduced rate between primary threshold and upper earnings limit
5.85%
5.85%
5.85%
Married women’s rate above upper earnings limit
2%
2%
2%
Employer’s secondary Class 1 rate above secondary threshold
13.8%
13.8%
13.8%
Class 2 rate (per week)
£3.00
£3.05
£3.05
Class 2 small earnings exception (per year)
£6,365
£6,475
£6,515
Special Class 2 rate for share fishermen (per week)
£3.65
£3.70
TBA
Special Class 2 rate for volunteer development workers (per week)
£5.90
£6.00
TBA
Class 3 rate (per week)
£15.00
£15.30
£15.40
Class 4 lower profits limit (per year)
£8,632
£9,500
£9,568
Class 4 upper profits limit (per year)
£50,000
£50,000
£50,270
Class 4 rate between lower profits limit and upper profits limit
9%
9%
9%
Class 4 rate above upper profits limit
2%
2%
2%
NI break for employers with young workers
Since 6 April 2015 the pay of an employee aged 20 or under is not liable to employer’s NI contributions on their pay. The exemption only applies to earnings up to the upper secondary threshold, which since 2015/16 has been set at the same level as the NI upper earnings limit.
Since 6 April 2016 employers do not have to pay secondary NI contributions for apprentices aged under 25 on wages up to the upper earnings limit.