Any benefits you get from a pension scheme, including guaranteed income from an annuity, are exempt from paying National Insurance contributions. However, you may be required to pay income tax on these payments.
You must pay National Insurance contributions on your earnings from employment or self-employment if you are under the age of the State Pension (provided that you earn above the minimum amount on which National Insurance contributions are charged).
When you reach the age of State Pension, you are no longer required to make National Insurance contributions. If you’re self-employed, you’ll still be assessed for Class 4 National Insurance contributions in the tax year in which you turn 65.
When you reach State Pension age, you can show your employer proof of age to stop paying National Insurance contributions (such as a birth certificate or a passport). You can also request that HMRC send a letter to your employer.
You can claim back overpaid National Insurance contributions from HMRC if you’ve paid them while you’re no longer due.
Can you opt out of paying National Insurance?
If you are working or self-employed, 16 or older, and earn more than the minimum wage, you cannot opt out.
If you work, your contributions will be withdrawn automatically from your take-home pay, so you won’t be able to opt out.
Can I stop NI contributions?
Even if you’re still working, you stop paying Class 1 and Class 2 payments once you reach State Pension age.
You’ll continue to make Class 4 payments until you reach State Pension age at the conclusion of the tax year in which you turn 65.
For example, suppose you turn 65 on September 6, 2021. You’ll stop making Class 4 contributions on April 5, 2022, and pay your final Class 4 bill, together with your income tax, by January 31, 2023.
Do you legally have to pay National Insurance?
If you’re over 16 and earn or have self-employed profits over a specific amount, you’ll have to pay National Insurance contributions. This contributes to your eligibility for benefits like the State Pension and Maternity Allowance.
What happens if I don’t pay NI contributions?
If you don’t pay national insurance, you’ll usually get a Notice of Penalty Assessment with a 30-day deadline to pay the penalty. The HMRC will tell you all you need to know about the late payment and penalty, including how to pay it and what to do if you want to appeal the decision.
Each penalty will be assigned a unique ID in your notification letter. It’s best to pay your penalty as soon as possible because outstanding payments will incur daily interest after the due date. If you don’t pay the balance in full within six months, you’ll be charged a 5% late fee. If payments are not completed after 12 months, the penalty rises to 5%. Both end-of-year adjustments and amounts due annually or on a regular basis are subject to penalties.
Incorrect data on the tax return, death or bereavement, ill health, fire, flood, or natural disaster, and theft and criminality are all grounds for appeal. You may even file an appeal if you are an employer who no longer has employees. An appeal can be made either online or in writing to HMRC:
How many years NI do I need for a full pension?
If you didn’t pay National Insurance or receive National Insurance credits before April 6, 2016, your State Pension will be computed totally under the new regulations.
To qualify for any State Pension, you must have at least 10 qualifying years on your National Insurance record.
If you have between 10 and 35 qualifying years, you will receive a share of the new State Pension.
Example
After April 6, 2016, you have 20 qualifying years on your National Insurance record.
If you were born after 2000 or became a UK resident after 2015, your new State Pension is more likely to be calculated this way.
Is it worth paying voluntary NI contributions?
Voluntary National Insurance contributions can help you earn the full State Pension by ensuring you have enough qualifying years. If you have any gaps in your record, you may be able to fill them with voluntary contributions.
Can you defer State Pension?
You must apply for your State Pension; it is not given to you automatically. You should receive a letter telling you what to do no later than two months before you reach State Pension age.
You don’t have to do anything if you want to defer. Your pension will be automatically postponed until you make a claim.
When you decide to claim your State Pension, deferring it may improve the amount you receive. Any additional payments you get as a result of deferring may be taxed.
What happens if you pay more than 35 years National Insurance?
Young persons who began working after April 5, 2016 are the most straightforward scenario. Things are fairly simple for them.
They will receive the full flat rate pension if they have 35 years or more of NI contributions (or credits).
If they have less years, their pension will be cut pro rata (34 years equals 34/35 of the full amount, etc. ), and if they have less than 10 years, they will receive nothing.
Can you claim back National Insurance?
If you are employed or self-employed and are 16 or older but not yet eligible for the state pension, you must pay NIC. The amount of NIC you pay is determined by your income.
The sort of NIC you pay is determined by how you work. Employees and other workers (such as those engaged by agencies) pay different sorts of NIC to self-employed people (that is, those who work for themselves).
Even if you continue to work, you stop paying NIC when you reach state pension age. The self-employed must pay Class 4 NIC until the start of the tax year following the year in which they attain state pension age.
You pay National Insurance on earnings, such as wages and profits from self-employment, but not on pension income.
You may use the GOV.UK calculator to figure out when you’ll be eligible for a state pension.
I am a student. Do I have to pay National Insurance contributions?
Students, especially overseas students, are not subject to any particular rules. You will be required to pay National Insurance contributions in the same way as other UK workers. If you need a National Insurance number or have lost yours, see our page How do I get a National Insurance number? for help. A National Insurance number may be included on the reverse of a biometric residency permit for migrants or international students.
What are National Insurance credits?
Even if you are not working, you may be eligible for National Insurance credits in certain circumstances. Some, but not all, entitlements are affected by these. The state pension is the primary benefit they are eligible for.
For the year in which you may be credited, you must be 16 or older and under the age of state pension.
You may be eligible for National Insurance credits in a variety of situations, including being unable to work due to illness or caring for someone else.
National Insurance credits are divided into two categories: Class 1 credits and Class 3 credits. The type of credit you may be eligible for is determined by your specific circumstances. To get National Insurance credits, you must meet specific requirements.
National Insurance credits should be given automatically in some cases, such as if you receive employment and support allowance or carer’s allowance. In other cases, you’ll have to file a claim.
GOV.UK has more information on the many situations in which you can be eligible for National Insurance credits, as well as how to apply for National Insurance credits.
Adult Specified Credits (also known as babysitting or grandparent’s credits) are discussed on a separate page.
What benefits do my contributions pay for?
To be eligible for various UK government benefits, you must have paid a particular amount of National Insurance Contributions (NIC). Contributory benefits are a type of governmental benefit. National Insurance credits will apply toward these contributory benefits in some situations, but not in others. On GOV.UK, you should carefully review the eligibility requirements. Many benefits rely on the payment (or credit) of enough NIC to generate a qualifying year.
Other benefits are available regardless of whether or not you have paid any or enough NIC, as long as the requirements for claiming apply to you.
To figure out which type of donation goes toward which benefit, look at the table below:
There are several exceptions to the aforementioned, such as share fishermen and volunteer development workers who work in other countries.
Contributions to Class 4 National Insurance do not count toward any state benefits.
What are Class 1 National Insurance contributions?
If you work for an employer, or if you are an employee, you must pay Class 1 NIC. Before paying you, your company deducts the NIC from your wages. Your company is also required to pay NIC on your earnings, but you do not have to be concerned about this.
In the employment section, there is full information about Class 1 NIC, including instances.
What are Class 2 National Insurance contributions?
If you are self-employed, you must pay Class 2 NIC. Our self-employment section has more information.
The Self Assessment system is how HMRC collects Class 2 NIC. This means you are exempt from paying contributions during the tax year. Your liability will become due at the end of the tax year, and you will be able to pay it with your Self Assessment tax bill.
If you are self-employed and subject to Class 2 NIC, you must ensure that you are both registered for Self Assessment and registered for Class 2 NIC on HMRC’s systems. If you fill out form CWF1 when you start your own business, this should happen immediately.
HMRC may automatically reject your Class 2 NIC if you submit self-employed profits on a Self Assessment tax return without completing a form CWF1 since they have no record of your liability. In this situation, you should call HMRC at 0300 200 3500 to request a correction.
In some conditions, persons who are working (or self-employed) overseas can additionally pay Class 2 NIC. Please read our migration section for further details.
What is the Small Profits Threshold?
If you’re self-employed and your profits fall below a certain threshold (the Small Profits Threshold), you won’t have to pay Class 2 NIC. The limit for 2021/22 is £6,515.
What are Class 3 National Insurance contributions?
You can pay Class 3 NIC if you do not pay either Class 1 or Class 2 NIC and do not obtain National Insurance credits, but you want to maintain your rights to particular state benefits. Donations that are made voluntarily are also known as voluntary contributions.
Class 3 NIC can be paid by monthly Direct Debit or quarterly payment request for the current year. You can make a one-time payment for previous years’ contributions.
What are Class 4 National Insurance contributions?
If you are self-employed, you must pay Class 4 NIC. Class 4 NICs are paid in addition to Class 2 NICs, but they do not count toward any state benefits.
Only if your profits exceed a particular threshold, known as the Lower Profits Limit, are you required to pay Class 4 NIC. For 2021/22, this is £9,568.
You must pay Class 4 NIC in addition to any self-assessment income tax.
How do I pay National Insurance contributions?
Under the PAYE system, you pay Class 1 NIC on your wages. Your employer deducts Class 1 NIC and any income tax owed from your gross wages before deductions, and gives you the net amount after deductions.
Self Assessment allows you to pay Class 2 NIC along with the income tax payable on your self-employment profits. Alternatively, you can use a Budget Payment Plan to make payments on a regular basis during the tax year.
HMRC is known to refuse Class 2 NIC payments if they are not correctly registered as being payable (see above).
You can pay Class 3 NIC by quarterly bill or monthly Direct Debit for the current year.
Self Assessment is how you pay Class 4 NIC and the income tax payable on your self-employment profits. See How do I pay tax on self-employed income? for additional information.
How do I claim a refund of overpaid or incorrectly paid National Insurance contributions?
The total amount of NIC you must pay in a tax year is limited (across different classes of contribution). If you’ve only had one job, you shouldn’t have overpaid NIC. However, if your total earned income exceeds the weekly upper earnings limit multiplied by 53 (£967 x 53 = £51,251 in 2021/22), you may have overpaid National Insurance Contributions.
The NIC of each individual is not reconciled by HMRC. This is due to the fact that paying the incorrect amount of NIC is relatively unusual.
- You continued to work after reaching state pension age, and your employer continued to deduct Class 1 National Insurance Contributions;
- You paid Class 4 NIC on self-employment profits in a tax year after the one in which you achieved state pension age;
- When your earnings were below the Small Profits Threshold limit, you paid Class 2 NIC as a self-employed individual;
- You were both employed and self-employed at the same time, and you paid Class 1, Class 2, and Class 4 National Insurance contributions.
You cannot get a NIC refund if you stop working or do not work for the entire tax year.
Simply because you are leaving the UK to reside in another country does not entitle you to a NIC refund. Visit the migration area for further details.
How do I check my National Insurance contributions record?
HM Revenue & Customs (HMRC) keeps track of how much NIC people pay. You can look up your NIC record by going to:
- contacting HMRC’s National Insurance Enquiries Helpline (information available on GOV.UK);