National Insurance Explained
A mandatory contribution deducted from your earnings alongside Income Tax. NI funds the State Pension, NHS and certain benefits. Your contribution record also determines your State Pension entitlement.
What is National Insurance?
National Insurance (NI) is a payroll tax on earnings. Employees, employers and the self-employed all pay it, though the rates and thresholds differ. Your NI contributions build your entitlement to the State Pension and certain benefits like Jobseeker's Allowance and Maternity Allowance.
You need 35 qualifying years of NI contributions to receive the full new State Pension of £230.25 per week in 2025-26.
How it works
For employees in 2025-26, the rates are:
| Earnings band | Employee rate | Employer rate |
|---|---|---|
| Below £12,570/year | 0% | 0% |
| £12,570 to £50,270 | 8% | 13.8% |
| Above £50,270 | 2% | 13.8% |
Self-employed individuals pay Class 2 (flat rate of £3.45/week) and Class 4 (6% on profits between £12,570 and £50,270, 2% above that).
You stop paying employee NI when you reach State Pension age, though your employer continues to pay their share.
Real example
Emma earns £35,000. Her annual employee NI is calculated as:
| Calculation | Amount |
|---|---|
| 8% on £22,430 (£35,000 minus £12,570) | £1,794.40 |
| Total annual NI | £1,794.40 |
| Monthly NI deduction | £149.53 |
Her employer also pays 13.8% on the same band, adding £3,095.34 per year in employer NI. This cost is invisible on Emma's payslip but is a real cost of employment.
Who does this affect?
Everyone who earns above the NI threshold pays National Insurance, whether employed or self-employed. You start paying from age 16 and stop at State Pension age (currently 66). People earning below the threshold but above the Lower Earnings Limit (£6,396 in 2025-26) still build NI credits toward their State Pension.
HMRC source
gov.uk/national-insurance covers contribution rates, thresholds and how to check your NI record online.
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