National Insurance Explained: Who Pays, How Much & What You Get

Q: How many NI qualifying years do I need for the full State Pension?

You need 35 qualifying National Insurance years to receive the full new State Pension of £241.30 per week in 2026-27. You need at least 10 qualifying years to receive any State Pension at all. A qualifying year is one where you paid (or were credited with) sufficient NI contributions. If you have gaps in your record, you can fill them with voluntary Class 3 contributions at £18.40 per week in 2026-27.

Q: Do I still pay National Insurance after State Pension age?

No. Once you reach State Pension age (currently 66 for both men and women), you stop paying employee National Insurance contributions even if you continue working. You still pay income tax on earnings above the Personal Allowance, but the NI deduction disappears from your payslip. This effectively gives older workers a pay rise in take-home terms.

Q: What does National Insurance actually pay for?

National Insurance contributions fund a range of state benefits. The primary ones are the State Pension, the NHS (in part), Jobseeker's Allowance, Employment and Support Allowance, and Maternity Allowance. Contributions go into the National Insurance Fund, which HMRC manages. The fund has historically been separate from general taxation, though in practice government can transfer funds between pots as needed.

National Insurance is the UK's second-largest tax, yet many workers are unsure exactly what it funds or how it builds their State Pension entitlement. This guide covers all the rates, thresholds and rules for 2026-27.

What Is National Insurance and What Does It Fund?

National Insurance (NI) is a payroll tax collected by HMRC alongside income tax. It was originally designed as a contributory insurance scheme, you pay in, and in return you are entitled to certain state benefits. The main benefits funded by NI are:

The State Pension (the biggest single beneficiary)
Contributory Jobseeker's Allowance and Employment and Support Allowance
Maternity Allowance
Bereavement benefits
A proportion of NHS funding

Unlike income tax, NI is only charged on earned income (wages and self-employment profits). Investment income, savings interest, rental income and pension income do not attract NI, which is a meaningful advantage for income above State Pension age and for those with unearned income.

Employee NI: Class 1 Rates for 2026-27

If you are employed, you pay Class 1 NI contributions. The rates for 2026-27 are:

Below £12,570 per year (the Primary Threshold): 0%, no NI payable
£12,570 to £50,270 per year: 8% on earnings in this band
Above £50,270 per year (the Upper Earnings Limit): 2% on earnings above this threshold

Example: on a £40,000 salary, your NI is 8% of (£40,000 − £12,570) = 8% of £27,430 = £2,194 per year, or approximately £183 per month.

Employer NI: Class 1 Employers' Contributions

Employers pay a separate, additional Class 1 NI contribution on top of your salary. Since 6 April 2025 the employer rate is 15% and the Secondary Threshold is £5,000 per year per employee. Both are unchanged for 2026-27. This is a cost you never see on your payslip, but it is a real cost to your employer on every pound of your salary above that threshold.

On a £40,000 salary: employer NI = 15% of (£40,000 − £5,000) = 15% of £35,000 = £5,250 per year. This means the true cost of employing someone on £40,000 is £45,250 per year to the employer, before pension contributions or other benefits. This is an important context for salary negotiations.

Self-Employed NI: Class 2 and Class 4

Two classes of NI apply to self-employed workers, although in practice most only pay Class 4:

Class 2 NI

Since 6 April 2024 you do not pay Class 2 if your profits are at or above the Small Profits Threshold (£7,105 in 2026-27). Your contributions are treated as paid, so the year still counts as a "qualifying year" toward your State Pension. If your profits are below £7,105, you pay nothing, but you can pay voluntary Class 2 at £3.65 per week (£189.80 per year) to keep building your NI record. That small amount protects pension entitlement worth far more in the long run.

Class 4 NI

Earnings-related contributions on self-employment profits: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Note that Class 4 is 2 percentage points lower than the employee Class 1 rate in the main band, a meaningful saving for the self-employed.

NI Rates Comparison Table (2026-27)

Type	Who Pays	Rate	On Income Between
Class 1 (employee)	Employee	8%	£12,570-£50,270
Class 1 (employee)	Employee	2%	Above £50,270
Class 1 (employer)	Employer	15%	Above £5,000
Class 2	Self-employed	£3.65/week (voluntary)	Profit below £7,105 (treated as paid above)
Class 4	Self-employed	6%	£12,570-£50,270
Class 4	Self-employed	2%	Above £50,270
Class 3 (voluntary)	Anyone with gaps	£18.40/week	To fill qualifying year gaps

How NI Builds Your State Pension

Every tax year you pay NI (or receive NI credits) counts as a "qualifying year." To receive the full new State Pension of £241.30 per week in 2026-27 (£12,547.60 per year), you need 35 qualifying years. To receive any State Pension at all, you need a minimum of 10 qualifying years.

If you have fewer than 35 qualifying years, your pension is proportionate: 25 years earns you 25/35 × £241.30 = £172.36/week. Gaps can occur due to career breaks, studying, or periods abroad. They can be filled with voluntary Class 3 contributions at £18.40 per week in 2026-27, often an excellent investment given the lifetime pension value.

NI Credits: Qualifying Without Paying

You can build qualifying years without actually paying NI through NI credits. These are awarded automatically when you claim certain benefits or meet specific criteria:

Claiming Child Benefit for a child under 12 (critical for parents who take career breaks)
Receiving Universal Credit, Jobseeker's Allowance or Employment and Support Allowance
Being too ill or disabled to work and claiming certain benefits
Being a foster carer
Jury service

If you are the main carer for a child under 12 and your partner claims Child Benefit, the credits go to the person claiming Child Benefit, not to you as the carer. This can result in gaps. You can transfer the credits to yourself by applying to HMRC.

When You Stop Paying NI

Employee and self-employed NI contributions stop when you reach State Pension age, currently 66. If you continue working past 66, income tax still applies but your payslip NI deduction disappears entirely. On a £30,000 salary, this saves approximately £1,394 per year, an effective pay rise simply from reaching pension age.

Frequently Asked Questions

How many NI qualifying years do I need for the full State Pension?

35 qualifying years for the full new State Pension of £241.30/week in 2026-27. You need at least 10 years to receive any State Pension. Gaps can be filled with voluntary Class 3 contributions at £18.40/week.

Do I still pay National Insurance after State Pension age?

No. Employee NI contributions stop at State Pension age (66). You still pay income tax on earnings above your Personal Allowance, but NI is no longer deducted, giving workers who continue past 66 an effective pay rise.

What does National Insurance actually pay for?

Primarily the State Pension, plus contributory benefits such as Jobseeker's Allowance, Employment and Support Allowance, Maternity Allowance, bereavement benefits, and a contribution to NHS funding.