You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension. The contributions you pay depend on how much you earn and whether you're employed or self-employed. You stop paying National Insurance contributions when you reach State Pension age.
Everybody gets a National Insurance number sent to them just before their 16th birthday. You keep the same number all your life. If you haven't got a number, find out here what to do. You’ll need to let your employer know your National Insurance details when you start work.
Once you’re earning over a certain amount you’ll start to pay National Insurance contributions and build up your entitlement to benefits, including money at times when you are unable to work. The most common of these are contributory Jobseeker’s Allowance, Statutory Sick Pay, Statutory Maternity Pay and State Retirement Pension.
If you're over 16 and employed, you’ll pay National Insurance as follows (2011-12 Tax Year):
- If you earn above £139.00 a week (the 'earnings threshold') and up to £817.00 per week you pay 12 per cent of this amount as 'Class 1' National Insurance contributions
- You also pay two per cent of earnings above £817.00 a week as Class 1 National Insurance Contributions
- You’ll pay a lower amount as an employee if you are a member of your employer's contracted out pension scheme
National Insurance contributions for self employed people are slightly different.
National Insurance gives you more information.
Your employer has a legal responsibility to deduct your National Insurance contributions from your wages along with Income Tax and pass it to Her Majesty's Revenue and Customs. These rates and other allowances are reviewed each year by the Chancellor of the Exchequer and changes announced in the annual Budget.
You can use the library in your Connexions Centre too as it has information for you to read or take away. Go to Weblinx for more useful websites.