Jeffrey Wade
National Insurance (NI) is a form of social security in the United Kingdom, where payments are made by employers, employees, and the self-employed. The amount of National Insurance tax one pays depends on their employment status and income. For the 2024/25 tax year, employees paid Class 1 NICs at 8% on earnings between £12,571 and £50,270, and 2% on any earnings above £50,270. Self-employed individuals paid Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% on profits above that. National Insurance contributions form a significant portion of the UK government's revenue, raising £145 billion in 2019-2020.
National Insurance Tax Rate Characteristics and Values
| Characteristics | Values |
|---|---|
| What is National Insurance? | A fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, with payment of NI contributions establishing entitlement to certain state benefits for workers and their families. |
| Who pays it? | Employers, employees, and the self-employed. |
| How much is paid? | The amount paid depends on employment status and income. |
| How is it paid? | For employees, NI is paid through the PAYE (Pay As You Earn) system along with Income Tax. Employers pay it directly to the government. |
| How often is it paid? | It is typically paid monthly or quarterly. |
| When did the latest changes occur? | The previous government cut National Insurance rates for workers in 2024. The rate was reduced from 12% to 10% in January 2024, and then to 8% in April 2024. |
| What were the rates before the changes? | For the 2023/24 tax year between 6 January and 5 April 2024, the general employee rate was 10%. |
| What are the rates after the changes? | The main (Class 1) National Insurance rate paid by employees is now 8% on earnings between £12,570 and £50,270 per year. The rate is 2% on any earnings above £50,270. |
| Are there different classes? | Yes, there are Class 1, Class 2, and Class 4 contributions, each with different rates and criteria. |
| How does it impact individuals? | Lower National Insurance contributions mean individuals keep more of their earnings. However, this should be considered in the context of the ongoing freeze on personal tax thresholds, resulting in ''fiscal drag'. |
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What You'll Learn
National Insurance contribution rates for employees
National Insurance is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, as payment of National Insurance contributions (NICs) establishes entitlement to certain state benefits for workers and their families. NICs are payable by employers, employees, and the self-employed.
For the 2024/25 tax year, employees pay Class 1 NICs at 8% on earnings between £12,571 and £50,270. The NICs rate is 2% for any income above £50,270 per year. A worker earning £35,000 per year can expect to pay £1,794 in Class 1 NICs. So, an employee earning a £55,000 per year salary will pay 8% NICs on earnings between £12,570 and £50,270, 2% on earnings above that, paying £3,110 NICs per year in total.
The main (Class 1) National Insurance rate paid by employees is 8%. This applies to all earnings, including tips for employees working in customer-facing roles. The previous government did cut National Insurance rates for workers. The rate paid by workers was previously reduced from 12% to 10% in January 2024, then cut further to 8% in April 2024.
The amount you pay in National Insurance is determined by whether you are employed or self-employed, and how much you earn. You do not pay National Insurance on the first £12,570 you earn.
Self-employed individuals pay Class 4 NICs on their profits from self-employment. For the 2024/25 tax year, Class 4 NICs are paid at 6% on profits between £12,570 and £50,270 and 2% on any profits above that. Compulsory Class 2 NICs were abolished from April 2024. Those who want to contribute voluntarily can still do so at a cost of £3.45 per week.
The rates at which an individual and their employer pay contributions depend on a number of factors. Consequently, there are many possible sets of employer/employee contribution rates to allow for all combinations of the various factors. HMRC allocate a letter of the alphabet, referred to as an 'NI Table Letter', to each of these sets of contribution rates. Employers are responsible for allocating the correct table letter to each employee depending on their particular circumstances. Each tax year, HMRC publish look-up tables for each table letter to assist with manual calculation of contributions.
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National Insurance contribution rates for the self-employed
National Insurance (NI) is a form of social security in the United Kingdom. It is paid by employers, employees, and the self-employed. The amount of National Insurance one pays depends on one's employment status and income. Self-employed individuals pay National Insurance contributions (NICs) on their profits from self-employment.
For the 2024/25 tax year, self-employed individuals paid Class 4 NICs at 6% on profits between £12,570 and £50,270 and 2% on any profits above £50,270. Prior to April 2024, the Class 4 NIC rate was 9%. From April 2024, self-employed individuals also stopped paying Class 2 NICs, which were fixed weekly amounts of £3.45. Those who want to continue contributing to their National Insurance record can still pay Class 2 NICs voluntarily.
Self-employed individuals must tell HM Revenue and Customs (HMRC) when they become self-employed as a sole trader or as a partnership. Most people pay Class 2 and Class 4 NICs through Self Assessment. Some self-employed people do not pay NICs through Self Assessment but may choose to pay voluntary contributions.
It is important to note that while the cuts in National Insurance rates are beneficial to workers, they should be considered in the context of the ongoing freeze on personal tax thresholds, which is due to end in 2028. As wages increase and income tax and National Insurance thresholds remain frozen, more people will be paying tax for the first time or move into higher tax bands, a phenomenon known as "fiscal drag".
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National Insurance contribution rates for employers
National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, with payment of NI contributions establishing entitlement to certain state benefits for workers and their families. Employers and employees pay Class 1 National Insurance depending on how much the employee earns.
For the 2024/25 tax year, employees pay Class 1 NICs at 8% on earnings between £12,571 and £50,270. The NICs rate is 2% on any earnings above £50,270. Employers also currently pay Class 1 NICs at 13.8% on their employees' earnings above £9,100. From 6 April 2025, the rate of employer NICs will increase from 13.8% to 15%. The secondary threshold (the amount at which employers start to pay NICs) will also be reduced from £9,100 to £5,000 a year from 6 April 2025 until 6 April 2028, and then increased in line with the CPI thereafter. Lowering the earnings threshold makes the tax applicable to more part-time workers and those on lower incomes, whose earnings previously excluded them from their employer's NICs bill.
There are a few ways for employers to mitigate the impact of the increase in employer NICs. One way is through pension contributions via salary exchange, where employers pay both their own and the employee's pension contribution. Another option is to retain the savings within the business to offset the impact of the increase in employer NICs.
HM Revenue and Customs (HMRC) collect National Insurance contributions through the PAYE (Pay As You Earn) system. Each tax year, HMRC publishes look-up tables to assist with the manual calculation of contributions, although these days, most calculations are done by computer systems.
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National Insurance thresholds
For the 2024/25 tax year, employees paid Class 1 National Insurance contributions at a rate of 8% on earnings between £12,571 and £50,270. Any earnings above £50,270 were taxed at a rate of 2%. The employee primary threshold National Insurance rate was reduced from 10% to 8%, and the married women's reduced rate was lowered from 3.85% to 1.85%. It is important to note that National Insurance deductions are only made on earnings above the Lower Earnings Limit (LEL). While the specific LEL amount was not found, it is essential for calculating National Insurance contributions.
Self-employed individuals paid Class 4 National Insurance contributions on their profits from self-employment. For the 2024/25 tax year, they paid 6% on profits between £12,570 and £50,270, and 2% on any profits above that. The Class 2 National Insurance contributions, which were fixed weekly amounts, were abolished from April 2024.
Employers also paid National Insurance contributions, known as Class 1 NICs, at a rate of 13.8% on their employees' earnings above £9,100. However, from 6 April 2025, the rate increased to 15%, and the secondary threshold was reduced from £9,100 to £5,000. This reduction expanded the number of employees covered by their employer's National Insurance bill, including part-time workers and those with lower incomes.
The National Insurance thresholds for the 2025/26 financial year have been updated, and these changes came into effect on 6 April 2025. The Upper Earnings Limit (UEL) for this tax year is £125,140. If an individual earns under a certain weekly amount, they are exempt from paying any National Insurance. For earnings within a specific range, the standard rate of 12% applies, while earnings above a certain weekly threshold are charged at a lower rate of 2%.
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National Insurance and tax
National Insurance (NI) is a form of social security in the United Kingdom. It was introduced by the National Insurance Act 1911 and has been amended several times since. NI contributions are made by employers, employees, and the self-employed. These contributions form a significant portion of the UK government's revenue, raising £145 billion in 2019-20.
The amount of National Insurance paid depends on employment status and income. For the 2024/25 tax year, employees paid Class 1 NICs at 8% on earnings between £12,570 and £50,270 per year. Above £50,270, the rate drops to 2%. Self-employed individuals pay Class 4 NICs on their profits. For 2024/25, Class 4 NICs are 6% on profits between £12,570 and £50,270, and 2% on profits above that. Class 2 NICs, which applied to fixed weekly amounts, were abolished in April 2024.
Employers also pay Class 1 NICs, currently at 13.8% on employee earnings above £9,100. This rate is set to increase to 15% from April 2025 to April 2028, and the threshold will be lowered to £5,000, expanding the number of employees covered by NICs.
While National Insurance rates for workers have decreased, the ongoing freeze on personal tax thresholds means that fiscal drag will pull more people into paying tax for the first time or push them into higher tax bands. As a result, many employees may not see the full benefit of the National Insurance cuts.
National Insurance contributions can be viewed on an individual's payslip. HM Revenue and Customs (HMRC) collect these contributions through the PAYE (Pay As You Earn) system, along with income tax and other deductions. To access certain benefits related to contributions, individuals need a National Insurance number.
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Frequently asked questions
The National Insurance tax rate for most employees in the UK is 8% on income between £12,570 and £50,270 a year. The rate is 2% on any income above £50,270 a year.
Self-employed individuals in the UK pay Class 4 NICs on their profits from self-employment. For the 2024/25 tax year, Class 4 NICs are paid at 6% on profits between £12,570 and £50,270 and 2% on any profits above that.
Employers in the UK pay a different rate of National Insurance depending on their employees' category letters. Employers also pay Class 1 NICs at 13.8% on their employees' earnings above £9,100. From April 2025, the rate of employer NICs will increase to 15%.
