What is National Insurance?
People in the UK pay National Insurance to get entitlement to benefits. It is a form of tax which people pay up until they have reached the age for state pension which is currently 60 years for women and 65 years for men.
Do all people pay it?
The three most common types of N.I. are listed below and you will have to pay it if you earn enough:
Self employed people pay 2 kinds: class 2 and class 4.
In the 2008/09 tax year you are required to pay class 4 N.I. on profits above £5435 at the rate of 8% then profits over £40,040 at 1%
Also anyone self-employed earning above £4825 is required to pay £2.30 weekly class 2 N.I. which contributes to towards the state pension.
Only the class 2 contributes to the state pension where as the class 4 does not.
Employees and Employers pay Class 1 N.I.
In the 2009/10 tax year anyone employed that is earning above £110 weekly will be due N.I. at 11% and earning above £844 weekly will be due N.I. at 1%.
Employers pay N.I. at 12.8% on any employees’ earnings above £110 weekly.