National Insurance (NI) is a contribution style system in the UK. This covers state pensions and benefits such as maternity allowance and contributions based on job seeker’s allowance. NI differs from income tax as it is paid at every pay-period rather than yearly and can not be claimed back.
National Insurance Classes
There are several classes of NI, it’s important to know which class you fall under so that you can ensure that you have paid the correct amount. If you haven’t paid enough national insurance you may find that you are no longer eligible for certain benefits such as your state pension or contributions based job seekers allowance. Ensure that you’ve checked your national insurance record here and decide whether voluntary payments are right for you.
Employees who are below the state pension age and are under the PAYE system pay class 1 contributions of 12% on a weekly income of £166 to £962. You’ll also need to pay a further 2% on a weekly income above £962. Employers must pay class 1A or 1B contributions towards the employee’s national insurance depending on which category the employee falls under – view the rates here.
Self-employed workers fall under class 2 (profits over £6,365 per year) or class 4 (profits over £8,632 per year). For others who do not fall under class 1, 2 or 4 you can make voluntary payments under class 3. Voluntary contributions may benefit you if you haven’t paid enough national insurance years to receive a state pension or other contributions based benefit schemes.
Paying NI Contributions
Permanent employee’s national insurance contributions are usually paid through the PAYE system along with their income tax and student loan deductions – this is the employer’s responsibility.
Umbrella companies operate between an employer and temporary employee to ensure that the correct tax and national insurance contributions have been paid. An umbrella company can also assist with some expense reimbursements for employees.
Our payroll solution for low paid temporary workers and contractors is PAYE Maxi – which provides the full benefits of an umbrella company. PAYE Maxi employees can offset expenses against their tax to ensure their take-home pay is higher. Speak to us on 0207 537 6631 or request a quote here to learn more about PAYE Maxi.
Under the construction industry scheme, subcontractors benefit from a reduced rate of national insurance contributions. They can also claim work-related expenses again in their yearly tax rate. Payroll Village can handle your paperwork and ensure that you are fully CIS compliant – learn more here.