A detailed, National Insurance Contributions (NICs) in the UK (2025/26): how they work, rates, examples, real-life stories, tables, FAQs, and practical advice for employees, employers, and the self-employed.
National Insurance Contributions in the UK: Explained Simply (2025 Edition)
The Answer Box
Short answer: National Insurance Contributions (NICs) are payments taken from pay in the UK to fund state benefits like the NHS, State Pension, and more. Employees, employers, and the self-employed each pay NICs at different rates, based on income. Recent changes—from 6 April 2025—affect rates and thresholds, so it’s vital to know how these work and how they impact your payslip and business.
Introduction: What Is National Insurance and Why Does It Matter?
Imagine you’re starting your first full-time job after uni. You get your first payslip and see deductions labelled “National Insurance.” Ever wondered where this money goes? Or why your self-employed friend pays NICs, but slightly differently?
National Insurance is the UK’s second-biggest tax revenue stream after income tax. It pays for state pensions, the NHS, maternity leave, unemployment support, and more. If you want a State Pension later, you must have enough years of “NI contributions.”
Real-Life Story: Sarah’s Surprise
Sarah, a new teacher in Birmingham, thought income tax was all she paid. When she got her first payslip with another deduction—NICs—she called her mum in confusion! Her mum explained: “It’s what gets you your pension later, and helps fund the NHS. Nearly everyone who works here pays it.”
Types of National Insurance Contributions
There are four main NIC classes. Here’s a simple table to guide you:
| Class | Who Pays? | Example |
|---|---|---|
| 1 | Employees & Employers | Workers on payroll |
| 1A/1B | Employers (on benefits) | Company cars & perks |
| 2 | Self-employed (flat rate) | Freelance designer |
| 3 | Voluntary (to fill gaps) | Non-working for some years |
| 4 | Self-employed (profits-based) | Successful small business |
Employee National Insurance – 2025/26 Update
How Does It Work?
If you’re on a regular payroll, you’ll pay NICs via PAYE (Pay As You Earn), just like income tax.
Key Facts for 2025/26
- You pay nothing on weekly earnings up to £242 (or £1,048/month)
- Between £242.01 and £967/week (or £1,048.01 to £4,189/month), you pay 8%
- On earning above £967/week (£4,189/month), only 2%
Example (Category A worker)
If you earn £1,000/week:
- £242: 0% NIC = £0
- £242.01–£967: 8% NIC = £58 (i.e. £967−£242=£725 × 8% = £58)
- Over £967: 2% NIC = £0.66 (i.e. £1,000−£967=£33 × 2% = £0.66)
- Total NIC paid = £58.66/week
Category Letters
You may notice “A”, “B”, etc., on your payslip indicating your NI category. Most employees are “A”. Some, like married women or apprentices, have different letters and rates.
Quick Reference Table (Employees)
| Weekly Earnings | “A” Category NIC Rate |
|---|---|
| Up to £242 | 0% |
| £242.01–£967 | 8% |
| Over £967 | 2% |
See HMRC’s guidance for other codes.gov
Employer National Insurance – Big Changes in 2025
Employers also pay NICs for staff, at a flat 15% on earnings above £96/week (or £417/month), effective 6 April 2025.
- Thresholds fell, so more wages are subject to employer NICs
- The rate increased from 13.8% to 15%
Example
If you earn £600/week, your employer pays:
- £600−£96 = £504 subject to NIC
- £504 × 15% = £75.60 employer NIC
For Business Owners: Employment Allowance
- Raised to £10,500 (from £5,000) in April 2025
- This helps small businesses cut NIC bills. Unlike before, there’s no longer a £100,000 cap, so more can claim
National Insurance for the Self-Employed
Two Types: Class 2 and Class 4
- Class 2: Flat rate (£3.45/week in 2025/26)bdo
- Class 4: Based on taxable profits
- 6% on profits £12,570–£50,270
- 2% above £50,270bdo
Example
If Priya runs a bakery and makes £35,000 profit:
- Class 2: £3.45 x 52 = £179.40
- Class 4: (£35,000−£12,570=£22,430) x 6% = £1,345.80
- Total NIC: £179.40 + £1,345.80 = £1,525.20/year
If she made £60,000, her Class 4 would be:
- (£50,270−£12,570=£37,700) x 6% = £2,262
- Plus (£60,000−£50,270=£9,730) x 2% = £194.60
- Total NIC = £179.40 + £2,262 + £194.60 = £2,636/year
“Why Am I Paying National Insurance?” (A Real-Life Dilemma)
Tom started a second job in 2025. He noticed higher deductions but didn’t realise each job’s wage is considered separately for NI purposes. Unlike income tax (where your allowance is spread between jobs if you ask HMRC), each employment calculates NIC on all its earnings.
Tip: If your earnings at multiple jobs are below the threshold, you may not pay any NIC. But if you’ve overpaid, you can claim a refund!
What Does National Insurance Actually Get You?
Your contributions build up State Pension “qualifying years.” Typically, you need at least 10 years to receive any State Pension and 35 years for the full new State Pension.
You may also be entitled to:
- Unemployment or sickness benefits
- Maternity Pay / Paternity Pay
- Bereavement Support
- Access to the NHS (everyone can, but paid by general taxation and NI)
Table: National Insurance Changes from April 2025
| Area | 2024/25 | 2025/26 |
|---|---|---|
| Employer rate | 13.8% | 15% |
| Employer weekly threshold | £175 | £96 |
| Employer annual threshold | £9,100 | £5,000 |
| Employee rate (main) | 8% | 8% |
| Employee rate (above UEL) | 2% | 2% |
| Employee weekly threshold | £242 | £242 |
| Employment Allowance | £5,000 | £10,500 |
| Self-employed Class 4 rate | 6% (£12,570–£50,270) | 6% (£12,570–£50,270) |
National Insurance Numbers – Your Unique ID
Anyone working in the UK needs a National Insurance number; it ensures your contributions are recorded properly. You’ll need it for:
- Starting work
- Claiming benefits
- Accessing your pension record
National Insurance and Retirement
Once you reach state pension age, you stop paying employee NICs (though not always employer contributions if you keep working). Self-employed people are also exempt after this age.
NICs for Students, Apprentices and Special Circumstances
- Students: Most do not pay NIC unless earning above the main threshold from work.
- Apprentices: Special categories and lower rates may apply up to age 25.
- Parents: Statutory Maternity/Paternity pay counts toward NIC qualifying years.
Gaps, Voluntary Contributions, and Catching Up
If you have years without work or were not paying enough (e.g., due to studying, unemployment, or working abroad), you can often pay voluntary Class 3 contributions to protect your future State Pension. But check costs—sometimes it’s not worth it, especially if you already have enough “qualifying years.”
Common Pitfalls & Real-World Tips
1. Multiple Jobs
Always check your total NIC if you work more than one job – overpayments are surprisingly common.
2. Changing between Employed and Self-Employed
If you switch, make sure to check with HMRC about NICs due – don’t end up with an accidental gap.
3. Payroll Errors
Pay slips can be confusing. Ask your employer or HMRC if what you’re seeing doesn’t match your calculations.
4. Value of Employment Allowance
If running a business, claim your full entitlement—this can offset your first £10,500 of employer NIC each year from April 2025.
Frequently Asked Questions (FAQs)
Q1: Do NICs fund the NHS entirely?
A: Not quite! While a big chunk of NHS funding comes from NI, general taxes make up the rest.ifs
Q2: Is National Insurance the same as income tax?
A: No—NICs are separate, with their own rates, thresholds, and what they fund. For most, both are paid together out of salary.
Q3: Do I still pay NI after pension age?
A: As an employee or self-employed, you stop paying after reaching State Pension age. But employers might still pay NIC on your earnings.
Q4: What if I’ve overpaid National Insurance?
A: You may be able to claim back overpayments from HMRC, especially if you’ve had multiple jobs or income types in a year.
Q5: Can I check my NI record?
A: Yes! You can check your personal NI record and forecasts for your future State Pension on the official government website.
Call to Action
Unsure how much NI you pay or want to check your State Pension forecast? Visit the UK government’s NI rates page, or log in to your HMRC online account today to review your record. Staying informed helps you make better decisions for your financial future!
Key Takeaways
- NICs are an essential part of the UK benefit and pension system.
- Employee & employer rates and thresholds changed from April 2025—check your payslip!
- The self-employed pay differently, through Class 2 & 4 NICs.
- You must have enough ‘qualifying years’ for retirement benefits.
- Double check your record and don’t hesitate to contact HMRC for help.
