Understanding National Insurance
National Insurance (NI) is a separate deduction from Income Tax that helps pay for state benefits and the State Pension. This guide explains who pays it, how employee contributions are worked out and how it appears on your payslip.
What National Insurance pays for
National Insurance contributions build your entitlement to certain state benefits, including the State Pension. The type and amount you pay depends on whether you are employed, self-employed, and how much you earn.
Employee contributions (Class 1)
Employees pay Class 1 National Insurance on earnings above a threshold. Like Income Tax, NI uses thresholds: you pay nothing below the first threshold, a main rate on earnings up to an upper limit, and a lower rate on earnings above that limit.
Employer contributions
Employers also pay National Insurance on their employees' earnings. This is an additional cost to the employer on top of your gross salary and does not reduce your take-home pay directly, but it is part of the total cost of employing you.
Seeing NI on your payslip
Your payslip shows National Insurance as a separate line from Income Tax. The salary calculator breaks both out so you can see exactly how your gross pay becomes your net pay.
Key takeaways
- National Insurance is separate from Income Tax.
- Employees pay Class 1 NI on earnings above a threshold.
- NI is usually calculated per pay period, not annually.
- Employers pay their own NI on top of your salary.
- Contributions count towards benefits such as the State Pension.
Frequently asked questions
Do I pay NI on all my earnings?
Does NI reduce my take-home pay like tax?
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This guide is general information about National Insurance and is not personal advice. Thresholds and rates change between tax years.