Last updated: April 2026 · Sourced from official UK government publications
This is a plain-English definitions guide. All rates and thresholds are drawn from HMRC and gov.uk official sources. This is not financial advice, see the disclaimer below.
National Insurance (NI) is a tax on your earnings, but it often confuses people because it works differently from income tax, has its own name and thresholds, and the rules keep changing. Here’s everything you need to know, with no jargon.
National Insurance is a UK tax on earned income that funds the State Pension, the NHS, and a small group of contributory benefits. It is paid by employees, employers, and the self-employed under different rules. NI runs alongside income tax (you pay both from the same pay packet), but the two are calculated separately, apply to different income types, and go to different places. NI applies only to earned income and stops once you reach State Pension age.
The HMRC term for individual NI payments is ‘Class 1’, ‘Class 2’, ‘Class 3’, or ‘Class 4’ contributions, depending on whether you are an employee, self-employed, or paying voluntarily. Definition reference: gov.uk/national-insurance.
Yes. Despite the name, National Insurance is a tax in everything but label. It is set by Parliament, collected by HMRC, mandatory for those above the threshold, and not refundable. The ‘insurance’ framing dates from the 1911 National Insurance Act, when contributions were closer to a personal pot. Today, NI receipts go into the National Insurance Fund and pay current claimants, not into a savings account on your behalf.
The Office for Budget Responsibility, HM Treasury, and the Institute for Fiscal Studies all classify National Insurance as a tax in their official publications.
Employees, employers, and the self-employed all pay National Insurance, but under different rules. Employees (Class 1) pay NI on earnings above £12,570 per year, deducted automatically via PAYE. Employers pay a separate NI charge on top of wages. The self-employed pay Class 4 NI through Self Assessment. You stop paying NI entirely when you reach State Pension age.
You stop paying NI when you reach State Pension age, even if you keep working.
As an employee in 2025/26, you pay 8% NI on earnings between £12,570 and £50,270 per year, and 2% on earnings above £50,270. For example, on a £30,000 salary you pay 8% on £17,430, roughly £1,394 per year or £116 per month. Your employer also pays 13.8% on your earnings above £5,000, which does not reduce your take-home pay but is a separate cost to them.
If you’re employed:
For example: if you earn £30,000 a year, you pay 8% on £17,430 (the amount above £12,570). That works out at roughly £1,394 per year, or about £116 per month.
Your employer also pays 13.8% on your earnings above the Secondary Threshold (£5,000 per year in 2025/26), that doesn’t come out of your wages but it’s part of the total cost of employing you.
Class 1 NI for employees is charged in two bands. The 2025/26 rates are:
Worked example for a £35,000 salary:
For a £65,000 salary, the calculation runs across both bands:
You can plug any salary into the take-home pay calculator to see the NI alongside income tax, pension, and student loan deductions.
National Insurance contributions fund the State Pension, the NHS, and contributory benefits including Statutory Maternity Pay, Statutory Sick Pay, and contribution-based Jobseeker’s Allowance. You need 35 qualifying years of NI contributions to receive the full new State Pension (£221.20 per week in 2024/25) and at least 10 qualifying years to receive any State Pension at all.
Your NI contributions build up your entitlement to:
Income tax applies to almost all income, wages, savings interest, dividends, and rental income, and continues for life. National Insurance only applies to earned income from employment or self-employment, stops at State Pension age, and is nominally linked to specific benefits and the State Pension rather than going into general government revenue. Both are currently collected via PAYE and share the same £12,570 starting threshold.
The key differences:
Everyone gets a National Insurance number automatically at age 16 (it arrives in the post a few months beforehand). It’s unique to you, in the format AB 12 34 56 C, and tracks your contributions throughout your working life. You’ll need it for any job, and when claiming certain benefits.
You can find yours on your payslip, P60, or by logging into the HMRC app.
National Insurance contributions fund the State Pension, the NHS, and contributory benefits such as Jobseeker's Allowance and Maternity Allowance. Contributions go into the National Insurance Fund and are used to pay current claimants rather than being saved in a personal account on your behalf.
Both are collected by HMRC via PAYE, but they are separate taxes with different rules. Income tax is calculated on total income above the personal allowance. National Insurance is only charged on earned income (wages and self-employment profits) within a specific band, it does not apply to pension income, rental income, or savings interest.
No. Once you reach State Pension age you stop paying National Insurance entirely, even if you continue working. Pension income itself, whether from a workplace, private, or State Pension, is never subject to National Insurance contributions at any age.
Gaps in your NI record can reduce your eventual State Pension entitlement. However, you may receive National Insurance credits automatically during periods of unemployment, illness, or caring responsibilities. Voluntary Class 3 contributions can be used to fill gaps, speaking to a financial adviser can help assess whether this is worthwhile for your situation.
You need 35 qualifying years of National Insurance contributions or credits to receive the full new State Pension (£221.20 per week in 2024/25). You need at least 10 qualifying years to receive any State Pension at all. You can check your NI record and State Pension forecast on the gov.uk website.
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