Worried about… Your National Insurance contributions?

National Insurance is a type of tax on your earnings, applicable to you, whether you are employed or self-employed. Your contributions help towards your eligibility for benefits such as the State Pension, Maternity Allowance and Paternity Allowance.

Who pays National Insurance contributions?

You need to pay National Insurance contributions (often known as NI) if you:

• Earn more than £242 per week and you are employed¹
• You are self-employed and your profit is higher than £11,908 per year²

Filling in the gaps

Did you know that your National Insurance (NI) contributions can affect how much State Pension you receive?

If you’ve had gaps in your NI contributions due to working or living abroad, you may not receive the full State Pension. This is worth knowing if you’re approaching retirement or reviewing your retirement plans.

If you are planning for your retirement, or approaching retirement, you might want to think about filling in any shortfalls in your retirement fund.

One of these ‘shortfalls’ can present in the form of gaps in your National Insurance contributions, especially if you have worked or lived abroad. These gaps can mean that you don’t receive the full State Pension (sometimes referred to as ‘qualifying years’).

You can however pay extra National Insurance contributions if you are eligible. Find out more here. 

If you are self-employed with a relatively low income, you can “top up” your National Insurance contributions with Class 2 or Class 3 voluntary contributions.

Or

You can fill in the gaps with Class 2 or Class 3 contributions, if you have lived or worked abroad, but have:

• Previously lived in the UK for three consecutive years.

Or

• Paid a minimum of three years of National Insurance contributions³.

If you have two jobs or a second income stream, such as your own small business or a freelance role, you will need to pay your own tax and National Insurance contributions by completing and returning a Self-Assessment tax return by 31^st January each year⁴.

Will I need to pay National Insurance on my second job?

You will need to pay Class 1 National Insurance contributions if you earn more than £242 a week in the 2022/23 tax year⁵.

If the combined earnings of both of your jobs are more than £242 a week, you will need to pay National Insurance contributions on both jobs⁶.

There are some professions which are exempt from paying National Insurance contributions. These include:

• Invigilators, examiners, moderators, and people who set examination questions
• Ministers of religion who are not in receipt of a salary or stipend
• People who own businesses to do with property or land
• People who invest for themselves or others, but who do not make a profit through doing so, e. they do not charge a fee or make a commission.

Although the people in the list above do not pay national Insurance contributions, they can be eligible to make voluntary contributions.

You can check whether there are ‘gaps’ in your National Insurance contributions here.

What matters to you, matters to us

1-2.  https://www.gov.uk/national-insurance

3.     https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

4.     https://www.gov.uk/self-assessment-tax-returns/deadlines

5-6.  https://www.moneyhelper.org.uk/en/work/employment/pay-and-tax-when-working-in-more-than-one-job

Lloyd & Whyte (Financial Services) Ltd  are authorised and regulated by the Financial Conduct Authority. Registered in England No. 02092560.  Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA. It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only.  We cannot assume legal liability for any errors or omissions it might contain.