National Insurance: the basics

National Insurance contribution types

There are different types of National Insurance contributions (NICs). Some are paid at a flat rate. With others, the amount payable is linked to earnings.

Class 1 NICs are calculated using three levels of earnings set by the government - the earnings threshold (ET), the lower earnings limit (LEL) and the upper earnings limit (UEL).

The ET and the UEL are explained below. The LEL is the level at which employees are entitled to National Insurance benefits, even if they are not paying any contributions.

The table below shows the different categories of NICs and who pays them.

Use our interactive tool to identify the National Insurance contributions you must pay.

NIC types explained

NIC type	Who pays it?	Basic explanation of NIC type
Class 1 primary contributions	Employees earning over the ET	Employees pay Class 1 NICs at one percentage rate on their gross earnings above the ET up to and including the UEL and at a reduced percentage rate for earnings over the UEL. They are 'deducted at source' from employee's salaries.
Class 1 secondary contributions	Employers, on the salaries of employees who earn above the ET	Employers (or those treated as the employer if the actual employer is outside the UK) pay Class 1 NICs on their employees' gross earnings over the earnings threshold at a single percentage rate. There is no UEL for employer's NICs. These are paid to HM Revenue & Customs (HMRC), usually on a monthly basis together with the employee's primary NICs.
Class 1A contributions	Employers	Payable by employers on their employees' benefits in kind such as a company car or private medical insurance. These are calculated and paid annually.
Class 1B contributions	Employers	Payable only by employers who have entered into a PAYE (Pay As You Earn) Settlement Agreement with HMRC to account for tax on certain expense payments and benefits.
Class 2 contributions	Self-employed	Payable by the majority of self-employed individuals at a flat rate, either monthly or quarterly.
Class 3 contributions	Voluntary	Payable at a flat rate by those who have not paid enough NICs to qualify for certain benefits, such as a state pension.
Class 4 contributions	Self-employed	Payable by self-employed individuals who have made a certain amount of profit in a year. Calculated annually using the self-assessment tax return form.

Subjects covered in this guide

Introduction
National Insurance contribution types
National Insurance contributions for employers and employees
National Insurance contributions for the self-employed
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