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National insurance

Class 1

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).

Employers pay Class 1 NIC in accordance with the table below.

From 6 April 2015 employer NIC for those under the age of 21 is reduced from the normal rate of 13.8% to 0%. For the 0% rate to apply the employee will need to be under 21 when the earnings are paid. This exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The weekly UST is £815 for 2015/16 which is equivalent to £42,385 per annum. Employers will be liable to 13.8% NIC beyond this limit.

Employees Class 1 NIC stop when they reach their ‘State Pension age’. The employer’s contribution continues.

Most employees and employers pay ‘contracted in’ rates i.e. the employee will accrue entitlement to the basic state pension and the ‘Additional State Pension’.

Employees (contracted in)

2015/16:
Earnings per week %
Up to £155 Nil¹
£155.01 – £815 12
Over £815 2

Important Notes…
¹Entitlement to state pension and other ‘contribution-based benefits’ is retained for earnings between £112 and £155 per week

2014/15:
Earnings per week %
Up to £153 Nil¹
£153.01 – £805 12
Over £805 2

Important Notes…
¹Entitlement to state pension and other ‘contribution-based benefits’ is retained for earnings between £111 and £153 per week.

Employers – Class 1

2015/16:
Earnings per week %
Up to £156 Nil
Over £156 13.8
Upper Secondary Threshold (for under 21s)
Up to £815
0

2014/15:
Earnings per week %
Up to £153 Nil
Over £153 13.8

Employers – Class 1

2015/16:

Other National Insurance payable by employers

Class 1A

13.8% on broadly all taxable benefits provided to employees.

Class 1B

13.8% on PAYE Settlement Agreements.

Class 2 and 4 (self-employed)

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits).

Class 2 NIC stop when a person reaches State Pension age.

Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

2015/16

Class 2 (£)
Flat rate per week 2.80
Small Profits Threshold (per annum)¹ 5,965

Important Notes…
¹No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.

2014/15
Class 2 (£)
Flat rate per week 2.75
Small Profits Threshold (per annum)¹ 5,885

Important Notes…
¹Application must be made for the small earnings exception. However, a person might decide to carry on paying class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.

Class 4

2015/16:

Annual profits %
Up to £8,060 Nil
£8,060.01 – £42,385 9
Over £42,385 2
2014/15:
Annual profits %
Up to £7,956 Nil
£7,956.01 – £41,865 9
Over £41,865 2

Class 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.

Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Flat rate per week

£14.10 (2014/15: £13.90)

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