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National Insurance - Your Way Around the Maze

Both self-employed and employed people must pay National Insurance Contributions. Employers also pay. The different classes are as follows:

1. Class 1 primary contributions are paid by employees;
2. Class 1 secondary contributions are paid by employers
3. Class 1A is paid by employers;
4. Class 2 is paid by the self-employed, and voluntarily by employees posted overseas;
5. Class 3 is a voluntary contribution to make up any deficits;
6. Class 4 is paid by the self-employed if they earn enough, but does not provide any entitlement to state benefits.

NIC for Employees

Changes to the NIC rates in 2024, cut the main rate of employee Class 1 National Insurance contributions by 2% from 10% to 8% from 6 April 2024.

NICs for Employers

Class 1 secondary contributions for 2024-25 are paid by the employer at the rate of 13.8% on all the employee's income above £175.01 per week.

The contributions must be paid over to HMRC together with the primary contributions deducted from the employees' salaries, each by the 19th of each month or by 22nd if paying electronically. Employers with small payrolls can elect to pay quarterly.

Class 1A contributions are paid by the employer on most forms of benefits provided to the employee, at the rate of 13.8% on the value of the benefit provided. Class 1A contributions are paid once a year by 6 July after the tax year end.

Employment Allowance

The Employment Allowance (EA) is available to most businesses and charities to offset against the cost of Employer's class 1 national insurance contributions. This applies to all businesses and employees not just new employees or new businesses.

For 2024/25 the allowance is £45,000 per year, per employer. The EA is restricted to employers whose employer’s NIC liability was below £100,000 in the previous tax year.

Self-Employed NIC

From 6 April 2024

The main rate of Class 4 National Insurance contributions for self-employed people was reduced from 9% to 6% on profits between £12,570 and £50,270. It remains at 2% on profits over £50,270. The Class 2 flat rate of National Insurance has been abolished.

Voluntary National Insurance

You can fill in any gaps you may have in paying NI contributions by paying Class 3.

For 2024-25, it costs £17.45 per week – the same rate as the previous tax year.

National Insurance increase from April 2022

From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25%. This will be spent on the NHS and social care in the UK.

The increase will apply to:

1. Class 1 (paid by employees)
2. Class 4 (paid by self-employed)
3. secondary Class 1, 1A and 1B (paid by employers)
4. The increase will not apply if you are over the State Pension age.

How We Can Help You

National Insurance can be a complex area and HM Revenue Customs have wide powers. We can assist you with compliance and taking advantage of NIC planning opportunities.