What National Insurance do I pay as an employee? | Low Incomes Tax Reform Group
for more general information about nic go to the page what is national insurance?. we also have a page on how to get a national insurance number.
If you are self-employed, we suggest you look at what national insurance I pay if I am self-employed? and how do I register for taxes and national insurance?.
Reading: How much national insurance do you pay
do I have to pay nic?
If you are an employee, you pay Class 1 NICs on your earnings from employment, such as wages and bonuses. the amount you pay depends on how much you earn in a particular pay period, but also see below how much do I have to pay after state retirement age?
How much should I pay?
There is a threshold (called the main threshold) and if, as an employee, your income falls below this, you do not need to pay any contribution. for 2022/23, this threshold is £190 per week or £823 per month between April 6 and July 5, 2022. the main threshold increases from July 6, 2022, and is £242 per week or £1,048 per month between July 6, 2022 and April 5, 2023, as announced in the spring 2022 statement. with the personal allowance for income tax.
The actual amount of class 1 nic you pay depends on how much you earn up to the upper earnings limit which is £967 per week or £4189 per month for 2022/23.
for 2022/23 the weekly class 1 nic rates for employees are as follows:
on the first £190 (April 6 – July 5, 2022)
on the first £242 (July 6, 2022 – April 5, 2023)
zero
with income between £190 and £967 (April 6 – July 5, 2022) with income between £242 and £967 (July 6, 2022 – April 5, 2023)
13.25% (April 6 – November 5, 2022) 12% (November 6, 2022 – April 5, 2023)
in amounts greater than £967
3.25% (April 6 – November 5, 2022) 2% (November 6, 2022 – April 5, 2023)
for 2022/23 the monthly class 1 nic rates for employees are as follows:
on the first £823 (April 6 – July 5, 2022)
on the first £1,048 (July 6, 2022 – April 5, 2023)
zero
with income between £823 and £4,189 (from April 6 to July 5, 2022) with income between £1,048 and £4,189 (from July 6, 2022 to April 5, 2023)
13.25% (April 6 – November 5, 2022) 12% (November 6, 2022 – April 5, 2023)
in amounts greater than £4189
3.25% (April 6 – November 5, 2022) 2% (November 6, 2022 – April 5, 2023)
rates were 12% and 2% in 2021/22. National insurance rates between April 6 and November 5, 2022 include a levy of 1.25% to directly support the NHS, bringing rates up to 13.25% and 3.25%. After the declaration of the growth plan at the end of September 2022, as of November 6, 2022, the NIC rates fall again. the proposed health and social care tax, which should have been in effect from April 6, 2023, will no longer be in effect.
The class 1 NIC is usually calculated on a week-to-week or month-to-month basis, depending on whether your employer pays you weekly or monthly. it is not cumulative like income tax deducted under pay as you earn (paye).
see karim’s example to see how to calculate your nic.
employer national insurance contributions
Your employer also pays Class 1 NICs on your earnings. sometimes they will show the amounts they have paid on the employer’s nic for your information on your payslip; they are not deducted from your payment.
It is quite common for people who work through an umbrella company to think that they are paying the employer’s NIC. however, this is often not the case, but rather is due to some confusion about how an umbrella company works.
you can get more information about it on our page am I employed, self-employed, both or neither?
can also be found with class 1a and class 1b nic. You won’t pay these contributions as an employee, but you may hear them mentioned, so it’s good to know what they are:
- your employer pays the class 1a nic if it provides you with certain benefits in kind, for example, a car for private use. the employer pays the nic on the value of the benefit in kind.
- Your employer pays for the class 1b nic if they enter into a special agreement with hmrc called a paye settlement agreement. this is where your employer pays your income tax due on certain in-kind benefits and expense payments.
- £190 (April 6 – July 5, 2022) or £242 (July 6, 2022 – April 5, 2023) per week or
- £823 (April 6 – July 5, 2022) or £1,048 (July 6, 2022 – April 5, 2023) per month.
- class 1 nic in your labor income; and
- class 2 and class 4 nic on your self-employment income.
- employer-provided pensions (and the costs of some associated guidance);
- child care (subject to certain limits, although please note that child care vouchers and direct contracted child care plans have been closed to new participants);
- cycle to workflow; and
- ultra-low emission cars.
What happens if I earn less than the weekly/monthly threshold?
if you have earnings above the lower earnings limit (£123 per week or £533 per month for 2022/23) and below the main threshold (£190 (April 6 – July 5, 2022) or 242 £ (July 6, 2022) – April 5, 2023) per week for 2022/23) (£823 (April 6 – July 5, 2022) or £1,048 (July 6, 2022 – April 5, 2023) per month for 2022/23) you will not have to pay any class 1 only. however, your nic registration will be ‘credited’, as you have paid for class 1 nics at zero rate. These can entitle you to contributory benefits and the state pension.
This type of ‘credits’ should be distinguished from the type of nic credits that you can sometimes get in a variety of circumstances, where people are unable to work. These may not always automatically count toward all tax benefits, as explained here.
if you earn less than the lower income limit (£123 a week for 2022/23), you do not pay class 1 nic, nor are you considered to pay any nic, so you do not receive any contribution attached to your nic record .
paying (or being treated as paid) nic through at least one job, helps you qualify for state pension and other contribution-based benefits. You can find more information about the state pension on the gov.uk website. You’ll need 35 qualifying years of contributions to get the full state pension amount (you should be able to get a prorated amount as long as you have at least ten qualifying years). You have until you reach state retirement age to make those contributions.
You can read more about what benefits depend on your NIC registration on our What is National Insurance? page.
What if I have more than one job?
In addition to paying taxes on a second job, you may also need to pay some National Insurance Contributions (NICs) on that second income. however, national insurance operates differently from income tax. With taxes, there is only one tax-free amount available per person per tax year. for national insurance there is a separate limit for each job as long as it is with a different employer. the limit is:
Unless you are a director of a company (or work for jobs for the same employer(s)), normally each job you hold is considered separately for NIC purposes. this means that each job has the full lower threshold, but you can pay nic on each job. However, if the employers are associated, for example if you work for two different branches of a supermarket, then your earnings must be added together for NIC purposes. If you’re not sure if your jobs are linked, you should ask your employer.
you can find more information on our page having more than one job.
if, in tax year 2022/23, you have two jobs and expect to pay a class 1 nic on weekly earnings of at least £967 for the entire tax year in one of the jobs, you can apply to defer payment of nic at the other job. If you are paid monthly, you should expect to pay Class 1 NICs on monthly earnings of at least £4,189 throughout the tax year in one of the jobs.
You make a class 1 nic deferral request using form ca72a. if you need them, there are guidance notes that you can download from the same page on gov.uk.
see the anya example to see how to calculate your nic if you have more than one job.
What happens if I work for someone else and on my own?
If you work for someone else and are self-employed, you must pay:
You will pay your class 1 nic each payday period, but your class 2 nic will not be charged until January 31 after the end of the fiscal year. your class 4 nics are paid along with your income tax responsibilities on your payments on account and balance payment.
When someone is employed and self-employed, there is an annual maximum of contributions owed; there is a link for more information at the bottom of this page. so you may not need to pay for the full class 2/class 4 nics if you have paid for enough class 1 nics.
when you complete your self-assessment tax return, hmrc will automatically calculate the class 2 nic and class 4 nic amounts, taking into account the overall maximum amounts due. You can read more about nic for freelancers in our freelancers section.
Do I have to pay NIC for any in-kind benefits I get from my job?
Normally, employees do not pay class 1 NICs on benefits and expenses even though they are taxable, although there are some exceptions.
For example, you do not have to pay class 1 NICs for the cash equivalent of the benefit of an interest-free or low-interest loan (a “charitable loan”) from your employer, although you may have to pay income tax on any benefit.
your employer may have to pay class 1a nic on the taxable benefit, if the loan is a beneficial loan.
If your employer cancels or forfeits the loan, it will deduct the Class 1 NIC and income tax from your other wages through payroll based on the value of the canceled loan.
On gov.uk, you can use the a to z list of benefits and expenses to see the NIC and tax treatment of any benefits provided to you by your employer. although this is aimed at employers, it will also be useful for employees.
In a fiscal year I earn less than the annual threshold to pay nic, but I paid something: why?
You will sometimes see nic thresholds given in yearly amounts as well as weekly or monthly amounts. However, you pay for the Class 1 NIC based on how much you earn each pay period, whether it’s a week or a month. you do not pay class 1 nic based on your total income for the entire year. it is not cumulative like income tax deducted under pay as you earn (paye).
If you earn more than the primary threshold in any particular pay period, weekly or monthly, you pay Class 1 NICs, even if your annual earnings divided by 52 weeks or 12 months are less than the primary threshold. If your earnings fluctuate, you may pay less in some pay periods but not in others.
see the emily example and the ali example to see how it works.
what nic problems exist for low-income part-time workers?
If you have a part-time job and only work a few hours a week, you can deliberately keep your income below the lower income limit for nics so that you don’t have to pay any class 1 nics. asks you to work more hours, you may be concerned about the effect on your nic responsibility.
you must take into account that the nic can “buy” benefits and pension rights. if you earn less than the lower income limit (£123 a week or £533 a month for 2022/23) for class 1 nic purposes, you pay no nic (nor are you considered to pay any nic, see below) and your right to contributory benefits or state pension could be affected.
For state pension purposes, a year only counts as a qualifying year if you pay enough contributions for that year. earnings below the lower earnings limit do not generate a qualifying year. for an example of this, see mustafa, below. However, sometimes you can get NIC credits to help fill in the gaps, for example, if you care for a child or a disabled person. If you want more information about NIC credits, go to the page What is national insurance?.
If you have employment income above the lower income limit (£123 per week or £533 per month for 2022/23), you are treated as having paid NIC at zero rate. however, you do not actually have to pay any class 1 nics until your income reaches the income threshold (primary threshold) (£190 (April 6 – July 5, 2022) or £242 (July 6, 2022 – Apr 5, 2022) per week; £823 (April 6 – Jul 5, 2022) or £1048 (July 6, 2022 – Apr 5, 2023) per month for 2022/23).
this means that for income between the lower income limit and the income threshold (more than £123/£533 but not more than £190/£823 per week/month (April 6 – July 5, 2022 ) or £242/£1,048 per week/month (July 6, 2022 – April 5, 2023) for 2022/23), enjoy the benefits of the nic system without the costs. you pay nic at a zero effective rate, but this can ‘buy’ the right to tax benefits and the state pension.
so if it is possible for you to work additional hours to generate earnings between the lower earnings limit and the main threshold, this will be beneficial and will give you the benefits of the nic system at no additional cost.
look at the lucy example to see how it works.
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Keep in mind, however, that a change in your income and/or work hours may also affect your eligibility for tax credits, the Universal Credit, or certain state benefits, so it’s worth considering the big picture. you may need to take some advice.
you can also find our news any questions? I am not paying national insurance at any of my vacation jobs. how will i be affected? Useful for understanding how working multiple low-income jobs can affect your eligibility for tax benefits and state pension.
What is the situation of married women who contribute at a reduced rate?
If you are a woman, who was married before April 6, 1977, you could choose before May 12, 1977 to pay the reduced class 1 nic rate. You can find more information on this at gov.uk.
How do salary sacrifice (optional compensation agreements), low earnings and the NIC interact?
A salary sacrifice agreement is an agreement to reduce an employee’s right to receive a cash payment, usually in exchange for a non-cash benefit.
How do these arrangements work?
Your employer may offer a salary sacrifice scheme that allows you to exchange cash salary for non-cash benefits. The idea is that if the benefits you choose are not subject to taxes and/or NICs, then you may be in a better position overall than if you simply bought the benefit from your net pay (after taxes and NICs) on a stand-alone basis.
example:
James’s current contract provides for a cash remuneration of £15,000 a year with no benefits. If James puts £500 of this into a pension, then only £14,500 will be taxed, but £15,000 will still be taxed. Under salary sacrifice, the employee agrees with the employer that in the future the employee will receive a cash remuneration of £14,500 a year and that the employer will put the £500 into a pension, tax and NIC free, for the employee. employee. this means that the employee’s and nic tax will only be charged on £14,500. The employer also does not have to pay the employer’s NIC on the £500 cash handed over.
Are salary sacrifice arrangements always a good idea for people with low incomes?
no.
Salary sacrifice isn’t always a good idea for low-income earners, and there’s one particularly unfavorable situation outlined below that you should be aware of. furthermore, you cannot participate in salary sacrifice schemes where your salary would be reduced below the national minimum or living wage.
However, salary sacrifice may benefit you in some circumstances, although since April 6, 2017 there have been fewer opportunities to benefit from such an arrangement.
charge from April 6, 2017
It used to be possible to sacrifice salary for many things. Due to perceived sacrificial wage abuses, as of April 6, 2017, generally speaking, any wages that are forfeited in exchange for benefits remain taxable and NIC as usual (with no charges arising). additional tax in relation to the benefit obtained in exchange), unless the cost to the employer is greater than the salary delivered: in this case, the higher value is used.
for example, if a gym’s annual membership is normally £500, an employer could negotiate that the cost it would pay per employee would be £400. he then offers that if the employees forgo (‘sacrifice’) £350 of pay, he will buy them gym membership. These employees who accept the offer would be taxed at £400 (the cost to the employer) as it is higher than the value of the salary foregone (£350).
There are specific rules that allow certain approved arrangements to continue to qualify for tax savings and/or NICs under salary sacrifice, including:
⚠️ a warning for people with low incomes
Although the salary sacrifice may sound attractive, if you have a low income, the advantages are limited. if you normally earn employment income between the lower income limit (£123 per week in 2022/23) and the income threshold (£190 (April 6 – July 5, 2022) or £242 (July 6, 2022 – April 5, 2023) per week in 2022/23), you don’t pay the class 1 nic anyway, so switching from a cash benefit to a non-cash one won’t save you the class 1 nic.
If the salary sacrifice reduces your income below the lower income limit, this is even more dangerous. if this happens, you do not pay class 1 nic, but your nic registration is not credited. this means that you lose the right to contributory benefits and the state pension, if you do not receive the credits from the nic by other means. This is a particular concern if your pre-slaughter salary was between the lower earnings limit and the earnings threshold, where you would have been entitled to NIC credits.
look at kerry’s example to see how salary sacrifice works.
If you are a low paid worker in a “relief at source” pension plan, please also see our separate page. for more information on salary sacrifice and a warning about entering a salary sacrifice pension plan.
what nic should I pay after state retirement age?
normally pays class 1 nics, if you are an employee, from age 16 until you reach state pension age. You can calculate your state pension age using the calculator at gov.uk.
If you continue to work as an employee after you have reached state retirement age, you do not have to pay class 1 nic. you only have to pay them on income that was due to be paid to you before you reached state retirement age.
you can find more information about nic after the state retirement age in our pensioners section.
please note that people over state retirement age will not be affected by the temporary increase in national insurance contributions for tax year 2022/23 to directly fund the nhs, but will be responsible for paying the tax of social and health care from April 2023.
What if I’m working abroad in the military?
you will continue to pay for the class 1 nic normally in your service payment.
If you have another job or are self-employed while working abroad, you may be required to pay the NIC equivalent in respect of that job in the country in which you live.
examples
karim
karim earns £15,080 a year, or £290 a week, from his part-time job as a milkman. in 2022/23, he every week he pays class 1 nic of:
£
April 6 – July 5, 2022
first £190
zero
£290-£190 = £100 at 13.25%
13.25
13.25
July 6, 2022 – November 5, 2022
first £242
zero
£290 – £242 = £48 at 13.25%
6.36
6.36
emily
emily works for only one employer, but her earnings fluctuate each month based on how many overtime hours she works.
Your employer deducts the Class 1 NIC each month from your earnings, using the employee rates and thresholds for 2022/23. the monthly primary threshold is £823 (April 6-July 5, 2022) or £1,048 (July 6, 2022-April 5, 2023).
April
£
April earnings
923
April primary threshold liftoff
(823)
payment subject to class 1 nic
£100
(class 1 nic at 13.25% costs £13.25)
may
£
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May earnings
923
main threshold liftoff in May
(823)
payment subject to class 1 nic
£100
(class 1 nic at 13.25% costs £13.25)
June
£
June earnings
1123
June primary threshold liftoff
(823)
payment subject to class 1 nic
£300
(class 1 nic at 13.25% for £39.75)
July
£
July earnings
723
July primary threshold liftoff
(1048)
payment subject to class 1 nic
0€ Please note that the previously paid class 1 nic should not be refunded.
and so on throughout the year
anya: two jobs
anya has two jobs. How much class 1 nic will she pay each week in 2022/23?
Anya earns £275 a week at her pharmacy job and a further £75 a week as a part-time dental assistant.
she will not pay nic on the salary she receives from the dentist, but she will have to pay nic on the chemist’s salary.
each week in the period from April 6 to July 5, 2022 you will pay £11.26, i.e. £275 less the main threshold of £190 at a rate of 13.25%. (in other words £85 per week at 13.25%). each week in the period July 6, 2022 to November 5, 2022 you will pay £4.37, i.e. £275 minus the increased primary threshold of £242 at a rate of 13.25% (in other words, £33 per week at 13.25%). each week in the period from November 6, 2022 to April 5, 2023 you will pay £3.96, i.e. £275 minus the increased primary threshold of £242 at a rate of 12%. (in other words, £33 per week at 12%).
anya’s employer, the chemist, will take this class 1 nic from her salary, along with any income tax due, before paying anya. Anya will also have to pay income taxes on her earnings as a dental assistant.
ali: how the lower limit for nic works
ali earns £5,500 a year, but the job is seasonal, so she works a lot around christmas and other holidays.
During Christmas and Easter in fiscal year 2022/23, he earns £650, but most other weeks his salary is £100 per week or less.
ali pays nic on her earnings of £650 in the weeks of christmas and easter, as in these weeks her earnings exceed the main threshold.
she does not pay class 1 nic on her earnings in weeks where she earns only £100 per week, as this is less than the main threshold. her earnings are also below the lower earnings limit, so she does not receive credits on her nic record.
lucy: low-income part-time worker
lucy currently earns £110 a week at her part-time job. she does not pay taxes or class 1 nic. Her employer offers her some extra hours. if she accepts the additional hours, she will earn £135 per week. she worries that she will have to pay class 1 nic and that the extra work won’t be worth it.
lucy’s earnings are currently below the lower earnings limit for class 1 nic. this means she is not entitled to tax benefits and is not accruing qualifying years for state pension purposes unless she receives credits from nic for another reason.
as her hours increase, lucy’s earnings will exceed the lower earnings limit (£123 per week) for class 1 nic purposes. however, as her earnings are below the main threshold of £190 per week ( April 6 – July 5, 2022) or £242 (July 6, 2022 – April 5, 2023), you don’t actually pay class 1 nic; instead, it pays for the nic at zero% and is therefore “credited” with the nic.
This means you could be entitled to tax benefits, and potentially a qualifying year for state pension purposes, without having to physically pay anything in terms of class 1 NICs. You’re also not earning enough to pay any taxes, for which will allow you to keep all of your £135 per week, although it may affect the state benefits you currently receive.
However, if your earnings rise above the main threshold (£190 per week (April 6 – July 5, 2022) or £242 (July 6, 2022 – April 5, 2023) in 2022/ 23), you will have to start paying class 1 nic on the excess of £190/£242 per week. the rate between April 6 and November 5, 2022 is 13.25%; the rate between November 6, 2022 and April 5, 2023 is 12%.
kerry: salary sacrifice
kerry earns £195 a week. Her employer suggests a salary sacrifice scheme whereby she gives up a cash salary in exchange for a pension contribution. the amount sacrificed will be £55 per week.
In the period from April 6 to July 5, 2022, pay class 1 nics at the standard rate of 13.25% on earnings over £190 per week. this equates to contributions of £0.66 per week. in the period from July 6, 2022 to April 5, 2023, you do not have to pay the class 1 nic but it is considered that you pay it at zero rate.
If you exchange £55 of cash salary for £55 of pension contributions each week, you will have cash earnings of £140 per week. that would still leave her in the bracket where she would be treated as if she paid nic at zero rate. however, if she sacrificed a further £20 per week of her wages to have additional pension contributions made on her behalf, her earnings would fall below the lower income limit and outside the NIC system. This could negatively affect Kerry’s entitlement to contributory benefits, statutory maternity pay, statutory sick pay, and statutory adoption pay, as well as her entitlement to a state pension. Kerry might be entitled to some nic credits in her place, which might entitle her to some benefits, but she would have to review the position carefully.
Your employer may also be in violation of national minimum wage standards.
mustafa
mustafa is low-income and confused because although he appears to have earned more than the required amount for a qualifying year, he has been told that he does not have a qualifying year.
for the employee’s earnings to count toward a qualifying year for state pension purposes, they must be earnings “upon which primary class 1 contributions have been paid or treated as paid” (and not to exceed the upper earnings limit). the annual earnings threshold to make a year qualify is defined as 52 times the lower limit of weekly earnings for the year. in 2022/23 this is therefore £6396 (£123 x 52).
so, while you do not need to earn above the lower income limit each and every week of the tax year, weekly earnings below this threshold (or monthly earnings below the monthly threshold, if paid monthly) will not count. Similarly, earnings in excess of the upper earnings limit are also ignored when calculating the total amount that will be compared to the annual threshold to determine if the year is qualified. there is no average in the calculation.
then, for example, in 2022/23: If you earn £190.50 a week for 26 weeks of the year, but only £100 a week for the other 26 weeks of the year, even though your total earnings will exceed £6,396 amount, you will not have a qualifying year as your earnings in the weeks you exceed the lel only reach £4,953.
On the other hand, you could “stack” 2022/23 as your qualifying year if you earned £350 a week, but only for 20 weeks of the year.
if an employed person (not self-employed) does not have enough income for the year to qualify, then it is worth seeing if they qualify for national insurance credits or want to pay for class 3 voluntary national insurance insurance contributions to cover any gap.
Where can I find more information?
if you want information on how to get a child, go to how do I get a national insurance number?
if you want general information about nic including details of where you can find more information, go to what is national insurance?.
Detailed hmrc technical guidance on nics, including annual maximum calculation, is available in the hmrc nics manual.
You can read more about optional remuneration schemes (salary sacrifice) in the hmrc labor income handbook on gov.uk.
if you have come from abroad to work in the uk, you can find information about your nic position in our immigrants section.
It is rare for employees to have an overpaid nic. there is information on how to claim a nic refund in the certain limited circumstances that exist in our what is national insurance? section.
Source: https://amajon.asia
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