National Insurance contributions (NICs) are hardly the most exciting subject. But all pay as you earn (PAYE) employees aged between 16 and state retirement age must pay them if they earn more than the primary threshold (£184 a week). Contributions are then paid at the full rate on all earnings up to the "upper earnings limit" (£967 a week). Sick and holiday pay is included.
National Insurance contributions are effectively an extra tax. While how much you have paid over a working life has some bearing on your entitlement to a state pension, your payments are in no way actually set aside for your pension. Instead, they just pop into the general pool of money being managed by the government. And you can't opt out.
So how much do you pay? There are various classes of National Insurance contributions. Employees pay primary Class 1 contributions, while the self-employed are liable for Class 2 and 4 contributions.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The basic NI rate for employees paying primary Class 1 contributions is 12% for earnings between the primary threshold and upper earnings limit, and 2% for earnings above.
-
House prices are falling in London but how does it compare to the rest of the UK?Advice The capital remains the most expensive part of the UK to buy a property, but it isn’t being as badly hit by the housing market slump. Where are London house prices heading?
-
Will a Santa Rally provide festive cheer for investors this year?
News Equities often get a seasonal boost during December - will there be a Santa Rally in 2023?
