How Much Is National Insurance? A Complete Guide Regarding Payment Calculation

Amid the rising inflation, the government is increasing the national insurance which has become a concern for the majority. Follow this article to understand everything you need to know about how much is national insurance and the need to pay it.

Insurance payment and finances are bound to get mind-boggling and keeping up with mathematical calculation can get very tiresome. However, the business of National Insurance is surprisingly easy to grasp.

Eliminating the constant fret and worry, the breakdown of the payment of National Insurance is admirably simple. Once you are 16 and earn a certain amount, you are bound to pay National Insurance contributions.

The following phenomena will facilitate building your entitlement to multiple benefits including the crucial ones like the State Pension and Maternity Allowance.

If you are new to the concept of National Insurance, you might have a burgeoning list of queries about what is a national insurance and rightly so. The complexities about how it works, how much is national insurance, how much you have to pay, how to calculate national insurance and much more can be puzzling.

To answer all your questions and concerns, this article will tackle all the salient features and aspects of national insurance in detail. Further, information regarding legal and financial intricacies are also involved, so continue reading to enhance your knowledge about national insurance.

What is national insurance?

For the unversed, national insurance is defined as a tax on earnings paid by both employees and employers who are also counted as the people who are currently self-employed. Introduced in 1911, the insurance aims to provide a fund for workers who lost their job or needed medical treatment.

Currently, the national insurance is used to pay for the NHS, benefits and the state pension The government can also borrow from the National Insurance Fund to pay for other projects. Moreover, the tax payment can help to build your entitlement to benefits depending on whether you are employed or self-employed.

Determining national insurance can be somewhat tricky since a plethora of social security providers majorly depends on the people who pay national insurance aka the national insurance contributions.

Factors like employment status, age, level of earring and much more can have diverse effects on the level of national insurance contribution that is required to be payable.

What does national insurance pay for?

The main idea behind National Insurance payments was to provide a government safety-net for workers who faced financial crises. The employees paid money into the scheme out of their wages. Back in the day, the citizens who required money for medical treatment or were facing unemployment could claim from

However, now the system has been significantly altered and an abundant amount of modifications have been made. Now, the question arises what does national insurance pay for?

Currently, National Insurance is used to pay for The NHS primarily. The National Health Service (NHS) is a publicly funded healthcare system. Moreover, NH also pays for unemployment benefits, sickness and disability allowances and the state pension.

Why do you need to pay National Insurance?

After explaining in detail what national insurance is. The next crucial question that might arise in one’s mind is why do you need to pay National Insurance?

Well for starters, paying National Insurance entitles you to some state benefits. The benefit count majorly depends on your employment factors. Hence, the state benefits will be varying whether you’re employed, self-employed or making voluntary contributions.

The duration of paying the national insurance is defined and one has to pay for a certain amount of years to be entitled to receive the state pension. In case, one hasn’t met the criteria of payment for example the minimum amount of contributions have not been paid then the individual will not be qualifying for some benefits.

How much is the national insurance tax?

After delving into details about the significance and advantages of paying the national insurance, how much you have to pay might sound a tad bit confusing.

Keep aside the overwhelming sentiments of being plundered into a rigmarole, such emotions can be easily eliminated; the calculations are not as hard as they seem. In simple words, the amount you’ll pay in National Insurance depends on the type and kind of National Insurance you’re paying.

Dividing into categories, there are four main classes of National Insurance that determine the amount that needs to be paid.

Class 1 – Paid by employees and employers

Class 2 – Paid if you’re self-employed

Class 3 – Paid by voluntary contributors

Class 4 – Paid when you are self-employed and have profits over a certain amount

Class 1 – If you are employed, how much to pay?

Class 1 deals with the National Insurance Rates in the case that the individual is employed or is an employer.

Let’s understand the entire process of payment through a simple example that will focus on the employee’s salary and the deduction due to National Insurance.

Suppose that you are earning more than $184 per week and you start to pay national National Insurance. We have already concluded that the National Insurance rate that one has to pay depends on how much you may earn.

Hence, the following is the breakdown of the required payment below:

12% of your weekly earnings are between $184 and $967 and 2% of your weekly earnings are above £967.

Now, for example, you have a monthly salary of  1,000 a week. You will be paying

  • nothing on the first £184
  • 12% ($93.96) on the next $783
  • 2% ($0.66) on the next $33.

It is pertinent to mention that as an employee your National Insurance contributions stop when you reach State Pension age. Class 1A or 1B deals with employers who pay these directly on their employee’s expenses or benefits

Class 2 – National insurance self-employed

Class 2 contributions are paid by people who are self-employed and do not work under any company.

Class 2 National Insurance contributions are set at a flat-rate weekly contribution of £3.05/week in 2020-21 and 2021-22.

Hence, the self-employed citizens have to pay every week or partial week of self-employment in a tax year. The following case is valid if the profits of the entire tax year are the Small Profits Threshold or greater in 2021-22.

In the instances where the profits are below the Small Profits Threshold, paying Class 2 contributions is voluntary for self-employed people.

It is important to mention that if the self-employed people are paying the Class 2 National Insurance contributions despite low profits, it can still assist in building contributory entitlements to benefits.

Class 3 – Voluntary national insurance rates

After employees and self-employed, the next comes the Class 3 voluntary National Insurance contributions. This division is designed and created to fill in the possible gaps in a citizen’s National Insurance record.

The major aim of Class 3 voluntary National Insurance contributions is to provide the individual with a higher state pension. Furthermore, the higher state pension can be achieved by fulfilling certain criteria where the first and foremost requirement is that an individual needs to have at least 35 qualifying years of National Insurance contributions.

In case one has not fulfilled the required hours, then he/she will receive a reduced State Pension. The new State Pension requires that the person has a minimum of ten qualifying years. Those who have not completed enough qualifying years are advised to pay Class 3 voluntary contributions to boost their pension entitlement.

As for the previous statistics, Class 3 contributions were payable at a weekly rate of £15.40 in the year 2021-22,

Moreover, there is a possibility that one might not always be able to pay Class 3 contributions for a tax year. Hence, it is essential to conduct detailed research over the concerning topics regarding whether one can make payments towards any gaps or how much you are required to pay.

Class 4 –  National insurance rates

Last but not the least, we have an insight into the national insurance rate in the case where you are self-employed and make high profits of a certain amount. The self-employed people who are earning well alongside handsome profits will be paying Class 4 National Insurance contributions.

Here we discuss a fairly easy example to gain insight into the mathematical working and logical aspect of the payments.

Assume that you are self-employed and your profit gain is over a certain threshold (as described in the criteria), then you will be paying 9% on profits between £9,559 and £50,270 in 2021-22 and 2% on profits over £50,270.

Student national insurance contributions

The preliminary condition before a person can start paying for the National Insurance contribution is that he/she needs to be 16-years-old and should be earning a certain amount, The students who are older and can earn enough are obliged to pay like any other worker.

There are occurrences where the students do not do paid work. In that condition, they are not credited with NIC for the number of years they are studying.

The aforementioned scenario will result in the creation of a ‘gap’ in their contributions record. Nevertheless, most of the students will still work for enough years after qualifying to merit a full state pension.

Low-earners and national insurance

The people who do not earn enough and lie below a certain salary threshold, are not obliged to pay National Insurance. A glimpse into the statistics for the year 2021-22, the limit was £9,568 for employed workers; in 2020-21 it was £9,500.

However, it is advisory to consider making voluntary Class 3 contributions since extensive gaps in an individual’s record may deprive him/her of several benefits in the longer run.

Married woman – National insurance contributions

Now, how much is national insurance for a married woman? Back in 1977, married women were allowed to make National Insurance contributions at a reduced rate. The following course of action made them stop building up entitlement to the state pension. This way they relied on their husband’s National Insurance contributions record.

The following dependence was termed as the ‘married woman’s stamp’. Majorly, the female who opted for the above-mentioned option could continue to make reduced National Insurance contributions.

In the other case, they could pay at the full rate and gradually build up individual pension entitlement. With reduced contributions, their maximum entitlement is currently 60% of basic state pension.

However, things have changed now. Women in such positions who have yet to reach state pension age are no longer eligible since 2016. The pension entitlement is currently depending on the number of qualifying years’ national insurance contributions they have made in their own right.

Making national insurance contributions

Once you have safely concluded which National Insurance Class you lie in, the next process that follows is the transaction process and the way the contributions need to be made.

For employed individuals, National Insurance is automatically deducted from your monthly pay and hence you will be freed from the hassle of organizing these contributions,

But the self-employed will be required to organize these contributions yourself. The process is initiated through your self-assessment tax return.

Either way, it is advisable to ensure that you pay the right amount of tax and for that, it’s essential to check and confirm that you have the correct tax code.

What is my national insurance number?

National Insurance numbers are set by the Department of Work and Pensions. Every number that is assigned to the contributors is unique. The NIN usage is primarily for identification purposes so that the government keeps track of how much tax has been paid.

Furthermore, It also keeps a thorough and detailed check regarding how much state pension one might owe or facilitates tracking of the tax allowance.

Delving into details about the assignment process, every person is only assigned one National Insurance number and the same number is utilized throughout the person’s lifespan.

As for the format of the National Insurance number, it mainly comprises three categories namely two letters, six numbers and a final letter.

The following national insurance number will determine how much is national insurance you are required to pay to achieve the state pensions.

How does one apply for a national insurance number?

The National Insurance Number is automatically allocated to an individual when he/she turns 16. Otherwise, the application process of the number can be initiated by following these steps.

  • If you have not received your National Insurance Number and you are under the age of 20, call the National Insurance number helpline (0300 200 3500).
  • If you are older than 20, call the National Insurance application line on 0800 141 2075.

Moreover, the office is only open Monday to Friday. The only document required is that you must have your ID. For issuance, an interview might as well be conducted for official protocols.

Calculating national insurance

Workers make contributions to national insurance in different ways depending on how they are employed and what they earn. The classes have been discussed in detail above to determine how much is national insurance.

The calculation of national insurance is done via the division known as National Insurance classes.

  • The Class 1 contributions are collected by PAYE while people under Class 1 A or B pay to HMRC
  • Class 2 are self-employed people with higher profits and they pay through self-assessment
  • Class 3 are Voluntary contributions and they are paid to HMRC through the form CF83

From April 2022, class 1 and class 4 contributions will increase by 1.25 percentage points as the government will introduce an additional health and social care levy to existing National Insurance payments.

Increase in national insurance

Inflation has emerged as a new war forefront after battling the coronavirus. The National insurance contributions will rise from April 2022.

The increase has been made to fund a health and social care levy. Everyone including the employees, employers, the self-employed and pensioners will be hit by higher tax bills.

Earlier, the pensioners were not required to pay national insurance after reaching the state pension age.

However, according to the new rules, everyone will have to pay the new levy on their earnings if they are still working from April 2023.

National insurance credits

Further, we discuss the terminology ‘National Insurance credits’ and how the following work at a larger scale.

National Insurance credits are an easy way of maintaining your National Insurance record when you are not making National Insurance contributions.

The aforementioned credits will help facilitate the individual to build up ‘qualifying years’. The following qualifying years will be counted towards your entitlement.

Entitlement to National Insurance credits

After the birds-eye view of National Insurance credits, we now dive into the intricacies and working of these credits. The general notion explains that the people who are qualified and meet the criteria of the credits are not making the contributions because they are not in paid employment.

The reason behind discounted employment can be listed as personal and professional reasons both. The possible reasons include maternity/paternity leaves, prolonged illness, unemployment or other private reasons.

Moreover, citizens are also eligible and can receive National Insurance credits when they are on an approved training course or busy performing jury service.

National Insurance credits are divided into two categories. The two types are discussed in detail below.

  • Class 1 covers State Pension and bereavement benefits along with other benefits like Jobseeker’s Allowance or Employment Support Allowance.
  • Class 3 credits only count towards your State Pension and bereavement benefits

Childcare and National Insurance credits

The benefits of National Insurance credits also extend to children. As per the criteria, the parents (aged over 16) who receive child benefits and are caring for a child under the age of 12 receive Class 3 National Insurance credits automatically.

Moreover, grandparents and other family members aged over 16 but under state pension age that provides care for a child may also be able to get Class 3 Specified Adult National Insurance credits. While for parents the credits are applied automatically, the grandparents or other family members are required to apply for these credits with the help of form CF411A.

In the scenarios where Carer’s Allowance is received, the contributor will automatically receive Class 1 credits on his/her National Insurance record.

Furthermore, the people on Income Support automatically qualify for Class 3 benefits but if they are not on Income Support and providing at least 20 or more hours/week to a sick or disabled person, they are eligible for Class 3 credits.

Unemployment and NI credits

Unemployment and NI credits scenarios have also been dealt with utmost care as according to the standards, the people who receive Universal Credit will automatically qualify for Class 3 National Insurance credits.


For the job seekers or potential candidates, they are eligible for Class 1 credits. The following credits will be automatically added to your record if he/she is receiving Jobseeker’s Allowance.


In case an individual is unemployed and not receiving Jobseeker’s Allowance, they are advised to claim the Class 1 credits via your local Jobcentre. If you’re sent by a JobCentre Plus, the credits will be added automatically.

There are other interesting options to successfully avail the Class 1 credits. If you attend a government-approved training course that’s less than one year long, you can avail of the credits.

Illness and disability NI credits

The sickness, illness and disability clauses have also been kept under consideration. The scenarios where an individual is unable to work due to illness, physical or mental disability, they can automatically receive National Insurance credits.

However, the predecessor condition is that the certain individual must be are claiming the following benefits as listed below:

  1. Employment and Support Allowance
  2. Unemployability Supplement or Allowance.

There is the possibility that the above-mentioned benefits have not been claimed or not received, then it is advisable to claim the Class 1 credit via your local Jobcentre.

As for the other occurrence, the citizen might be receiving Statutory Sick Pay but not earning enough to make a qualifying year for National Insurance. Then he/she is eligible for Class 1 credits.

Jury duty and NI credits

Above we mentioned that Class 1 National Insurance credits can be easily received in case the concerned person has been attending the court for jury duty and is not self-employed.

However, the credits will not be automatically transferred in the following case, Rather, the person will need to apply for these in writing from HMRC. The offices that need to be notified are the National Insurance contributions and Employers Office, HM Revenue and Customs, BX9 1AN.

Requesting state pension from national insurance contribution record

The acknowledgement and information received regarding state pension can be done through state pension forecast which will give insight into the current National Insurance contribution record.

The projected State Pension of any individual is solely based on whether he/she resumes making National Insurance contributions. Furthermore, the State Pension forecast will also give a detailed explanation about contracting out of the additional State Pension.

Another possible scenario is that someone might be able to contract out for some time and it will display information as a ‘Contracted Out Pension Equivalent. The following process determines the amount received as an additional State Pension.

What benefits does national insurance contributions (NIC) pay for?

Below are the benefits which depend on national insurance contributions NIC:

  1. Maternity Allowance
  2. Contribution-based/New Style Jobseeker’s Allowance (JSA)
  3. Contribution-based/New Style Employment and Support Allowance (ESA)
  4. Bereavement Benefits
  5. Basic State Pension
  6. New State Pension

Here, we list down a plethora that does not depend on national insurance contributions NIC:

  1. Attendance Allowance
  2. Disability Living Allowance (DLA)
  3. Personal Independence Payment (PIP)
  4. Child Benefit
  5. Guardian’s Allowance
  6. Universal Credit


In conclusion, the amount of national insurance depends on employment status and how much an individual earns. The following healthcare policy does cater to citizens’ ease and adjustability.  While the process of credits and transactions might fall into a rigmarole and get perplexing, the benefits can surely be helpful for the citizens in retirement. The contribution of headstart can be easily termed the driving force that will in future provide state benefits. The series of National Insurance contributions and credits can be easily sorted and dealt with to avoid further complications.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

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