What National Insurance do I pay as an employee?

For more general information on NIC go to the page What is National Insurance?. We also have a page on how to get a National Insurance number.

If you are self-employed, we suggest you look at What National Insurance do I pay if I am self-employed? and How do I register for tax and National Insurance?.

Do I have to pay NIC?

If you are an employee, you pay Class 1 NIC on your earnings from employment, such as salaries and bonuses. The amount you pay depends on how much you earn in a particular pay period, but also see below What NIC do I pay after state pension age?.

How much NIC do I pay?

There is a threshold (called the primary threshold) and if, as an employee, your income falls below this you do not need to pay any contributions. For 2023/24 this threshold is aligned with the personal allowance for income tax, and is therefore £242 a week or £1,048 a month. 

The actual amount of Class 1 NIC you pay depends on what you earn up to the upper earnings limit, which is £967 per week or £4,189 per month for 2023/24.

For 2023/24 the weekly rates of Class 1 NIC for employees are as follows:

On first £242	Nil
On income between £242 and £967	12%
On amount above £967	2%

For 2023/24 the monthly rates of Class 1 NIC for employees are as follows:

On first £1,048	Nil
On income between £1,048 and £4,189	12%
On amount above £4,189	2%

 

Class 1 NIC is generally calculated week by week or month by month, depending on whether your employer pays you weekly or monthly. It is not cumulative like income tax deducted under Pay As You Earn (PAYE).

Employer National Insurance contributions

Your employer pays Class 1 NIC on your earnings too. Sometimes they will show the amounts that they have paid in employer NIC for your information on your payslip – they are not being deducted from your pay.

It is quite common for people who work through an umbrella company to think that they are paying employer NIC. However, this is not actually usually the case, but is rather down to some confusion about how an umbrella company works.

You can find out more about this on our page Am I employed, self-employed, both or neither?.

You may also come across Class 1A and Class 1B NIC. You will not pay these contributions as an employee, but you might hear them mentioned, so it is as well to know what they are:

• Class 1A NIC is paid by your employer if they provide you with certain benefits-in-kind, for example, a car for private use. The employer pays the NIC on the value of the benefit-in-kind.
• Class 1B NIC is paid by your employer if they enter into a special arrangement with HMRC called a PAYE settlement agreement. This is where your employer pays your income tax due on certain benefits-in-kind and expenses payments.

What happens if I earn less than the weekly/monthly threshold?

If you have earnings above the lower earnings limit (£123 per week or £533 per month for 2023/24) and below the primary threshold (£242 per week or £1,048 per month for 2023/24) you will not have to pay any Class 1 NIC. Your NIC record will be ‘credited’, however, as you have paid Class 1 NIC at a zero rate. These may earn you entitlement to contributory benefits and the state pension.

This type of ‘credits’ are to be distinguished from the type of NIC credits that you can sometimes get in a variety of circumstances, where people are unable to work. These may not always automatically count towards all contributory benefits, as we explain here.

If you earn less than the lower earnings limit (£123 a week for 2023/24), you pay no Class 1 NIC, nor are treated as paying any NIC, and so you do not get any contributions attached to your NIC record.

Paying (or being treated as paying) NIC through at least one job, helps you qualify for the state pension and certain other contribution-based benefits. You can find out more about the state pension on GOV.UK. You will need 35 qualifying years' worth of contributions to get the full amount of the state pension (you should be able to get a pro-rata amount provided you have at least ten qualifying years). You have until you reach state pension age to make those contributions.

You can read more about which benefits depend on your NIC record on our page What is National Insurance?.

What happens if I have more than one job?

As well as paying tax on a second job, you might have to pay some National Insurance contributions (NIC) on that second income as well. However National Insurance operates in a different way from income tax. With tax there is a single tax-free amount available per person per tax year. For National Insurance there is a separate limit for each job so long as it is with a different employer. The limit is:

• £242 per week or
• £1,048 per month.

Unless you are a director of a company (or you work for jobs for the same employer, or associated employers), normally each employment you have is looked at separately for NIC purposes. This means that each job has the full lower threshold, but that you may pay NIC on each job. If the employers are associated, though, for example if you work for two different branches of a supermarket, then your earnings should be added together for NIC purposes. If you are not sure whether your employments are associated then you should ask your employer.

You can find more information on our page Having more than one job.

If, in the 2023/24 tax year you have two jobs, and expect to pay Class 1 NIC on weekly earnings of at least £967 throughout the whole tax year in one of the jobs, you can ask to defer payment of NIC in the other job. If you are paid monthly, you must expect to pay Class 1 NIC on monthly earnings of at least £4,189 throughout the whole tax year in one of the jobs.

You make an application for deferment of Class 1 NIC using form CA72A. If you need them there are guidance notes you can download from the same page of GOV.UK.

Look at example Anya to see how to work out your NIC if you have more than one job.

What happens if I am both employed and self-employed?

If you are both employed and self-employed you need to pay:

• Class 1 NIC on your employed income; and
• Class 2 and Class 4 NIC on your self-employed income.

You will pay your Class 1 NIC each pay day period, but your Class 2 NIC are not collected until 31 January after the end of the tax year. Your Class 4 NIC are paid together with your income tax liabilities in your payments on account and balancing payment.

Where someone is both employed and self-employed there is an annual maximum of contributions that is due – there is a link to further information at the end of this page. Therefore you may not need to pay full Class 2/Class 4 NICs if you have paid sufficient Class 1 NIC. You can read more about NIC for the self-employed in our self-employment section.

Do I have to pay NIC on any benefits-in-kind I have from my job?

Normally, employees do not pay Class 1 NIC on benefits and expenses even if they are taxable, although there are some exceptions.

For example, you do not have to pay Class 1 NIC on the cash equivalent of the benefit of an interest-free or low-interest loan (a 'beneficial loan') from your employer, although you may have to pay income tax on any benefit.

Your employer may have to pay Class 1A NIC on the taxable benefit, if the loan is a beneficial loan.

If your employer writes off or waives the loan, they will deduct Class 1 NIC and income tax from your other wages through the payroll based on the value of the loan that has been written off.

On GOV.UK, you can use the A to Z list of expenses and benefits to see the tax and NIC treatment of any benefits your employer gives you. Although this is aimed at employers, it will also be useful to employees.

In a tax year I earn less than the annual threshold for paying NIC, but I paid some: why?

Sometimes you see the NIC thresholds given in annual amounts, as well as weekly or monthly amounts. However, you pay Class 1 NIC based on the amount you earn in each pay period, whether that is a week or a month. You do not pay Class 1 NIC based on your total earnings for the whole year. It is not cumulative like income tax deducted under Pay As You Earn (PAYE).

If you earn more than the primary threshold in any particular pay period, weekly or monthly, you pay Class 1 NIC, even if your annual earnings divided by 52 weeks or 12 months are less than the primary threshold. If your earnings fluctuate, you may find that you pay NIC in some pay periods but not in others.

Look at the example Emily and example Ali to see how this works.

What NIC issues are there for part-time workers on a low income?

If you are employed part-time and only work a few hours a week, you may deliberately keep your earnings below the lower earnings limit for NIC, so that you do not have to pay any Class 1 NIC. If you are asked to work more hours, you may be worried about the effect on your NIC liability.

You should be aware that NIC can 'buy' benefit and state pension entitlement. If you earn less than the lower earnings limit (£123 a week or £533 a month for 2023/24) for Class 1 NIC purposes, you pay no NIC (nor are treated as paying any NIC – see below) and your entitlement to contributory benefits or the state pension could be affected.

For state pension purposes, a year only counts as a qualifying year if you pay sufficient contributions for that year. Earnings below the lower earnings limit do not generate a qualifying year. For an example of this see Mustafa, below. However, you can sometimes get NIC credits to help plug any gaps, for example if you look after a child or disabled person. If you want more information on NIC credits go to the page What is National Insurance?.

If you have employment earnings above the lower earnings limit (£123 per week or £533 per month for 2023/24), you fall within the NIC system and are treated as having paid NIC at a zero rate. However, you do not actually have to pay any Class 1 NIC until your earnings reach the earnings threshold (primary threshold) (£242 per week; or £1,048 per month for 2023/24).

This means that for earnings between the lower earnings limit and the earnings threshold, you enjoy the benefits of the NIC system without the costs. You pay NIC at an effective nil rate, but this can 'buy' entitlement to contributory benefits and the state pension.

Therefore, if it is possible for you to work additional hours to bring earnings between the lower earnings limit and primary threshold, this will be beneficial and will give you the benefits of the NIC system for no extra cost.

Look at the example Lucy to see how this works.

Note, however, that a change in your earnings and/or working hours can also affect your entitlement to tax credits, universal credit or certain state benefits so it is worth considering the overall picture. You might need to take advice.

What is the position for married women paying reduced rate contributions?

If you are a woman, who married before 6 April 1977, you could elect by 12 May 1977 to pay reduced rate Class 1 NIC. You can find more information about this on GOV.UK.

How do salary sacrifice (optional remuneration arrangements), low earnings and NIC interact?

A salary sacrifice arrangement is an agreement to reduce an employee's entitlement to cash pay, usually in return for a non-cash benefit.

How do these arrangements work?

Your employer may offer a salary sacrifice scheme that enables you to swap cash salary for non-cash benefits. The idea is that if the benefits you choose are not liable to tax and/or NIC then you can be in a better position overall than if you merely purchased the benefit from your net (after tax and NIC) salary independently.

Example:

James’s current contract provides for cash pay of £15,000 a year with no benefits. If James puts £500 of this into a pension, then tax will only be due on £14,500 but NIC will still be due on the £15,000. Under salary sacrifice, the employee agrees with the employer that for the future the employee will be paid cash remuneration of £14,500 a year and that the employer will put the £500 into a pension, tax and NIC free, for the employee. This means that the employee’s tax and NIC will only be charged on £14,500. The employer does not have to pay employer’s NIC on the £500 cash given up either.

Are salary sacrifice arrangements always a good idea for low earners?

No.

Salary sacrifice is not always a good idea for low earners, and there is one particularly unfavourable situation set out below to be aware of. Also, you cannot participate in salary sacrifice schemes where your pay would be reduced below the national minimum or living wage.

Nevertheless, salary sacrifice can benefit you in some limited circumstances.

Generally, any salary that is given up in exchange for benefits remains liable to tax and NIC (with no additional tax charge arising in connection with the benefit obtained in exchange), unless the cost to the employer is more than the salary given up: in that case the higher value is used.

For example, if an annual gym membership is normally £500 an employer might manage to negotiate that the cost it would pay per employee would be £400. It then offers that if employees give up (‘sacrifice’) £350 of pay that it will buy them gym membership. These employees who take up the offer would be taxed on £400 (the cost to the employer) as it is higher than the value of salary sacrificed (£350).

However there are specific rules that allow certain approved arrangements to qualify for tax and/or NIC savings under salary sacrifice, which include:

• Employer provided pensions (and the costs of certain associated guidance);
• Childcare (subject to certain limits, although note that childcare vouchers and directly contracted childcare schemes have closed to new entrants);
• Cycle to work scheme; and
• Ultra-low emission cars.

⚠️ A warning for people with low earnings

Although salary sacrifice can sound attractive, if you are a low earner, the advantages are limited. If you normally earn employment income between the lower earnings limit (£123 per week in 2023/24) and the earnings threshold (£242 per week in 2023/24), you do not pay Class 1 NIC anyway, so switching from cash to a non-cash benefit will not save Class 1 NIC for you.

If the salary sacrifice reduces your earnings below the lower earnings limit, this is even more dangerous. If this happens, you do not pay Class 1 NIC, but your NIC record is not credited. This means that you lose entitlement to contributory benefits and the state pension, if you do not receive NIC credits in another way. This is a particular worry if your pre-sacrifice salary was between the lower earnings limit and the earnings threshold, where you would have been treated as paying NIC at 0%.

Look at the example Kerry to see how salary sacrifice works.

If you are a low paid worker in a ‘relief at source’ pension scheme, also see our separate page Do you understand how tax relief on your pension contributions works? for more information on salary sacrifice and a warning about entering a salary sacrifice pension scheme.

What NIC do I pay after state pension age?

You normally pay Class 1 NIC, if you are an employee, from age 16 until you reach state pension age. You can work out your state pension age using the calculator on GOV.UK.

If you continue to work as an employee after you have reached state pension age, you do not have to pay Class 1 NIC. You only have to pay them on any earnings that were due to be paid to you before you reached state pension age.

You can find more information on NIC after state pension age in our pensioners section.

What happens if I am working abroad in the armed forces?

You will continue to pay Class 1 NIC as normal on your service pay.

If you have another job or are self-employed whilst working abroad then you may have to pay the equivalent of NIC in respect of that work in the country in which you are living.

Examples

Emily

Emily works for a single employer, but her earnings fluctuate each month depending on how much overtime she works.

Her employer deducts Class 1 NIC each month from her earnings, using the employee rates and thresholds for 2023/24. The monthly primary threshold is £1,048.

April	£
April earnings	1,148
Take off Primary Threshold	(1,048)
Pay subject to Class 1 NIC	£100
(Class 1 NIC at 12% is £12.00)
May	£
May earnings	1,148
Take off Primary Threshold	(1,048)
Pay subject to Class 1 NIC	£100
(Class 1 NIC at 12% is £12)
June	£
June earnings	1,348
Take off June Primary Threshold	(1,048)
Pay subject to Class 1 NIC	£300
(Class 1 NIC at 12% is £36.00)
July	£
July earnings	723
Take off July Primary Threshold	(1,048)
Pay subject to Class 1 NIC	£0. Note no refund of Class 1 NIC previously paid is due.
And so it goes on throughout the year

Anya: two jobs

Anya has two jobs, earning £275 a week from her job in a chemist and a further £75 a week as a part time dental assistant. 

She will pay no NIC on the wages she gets from the dentist, but she will have to pay NIC on the chemist wages.

Each week in 2023/24 she will pay £3.96, that is, £275 less the increased primary threshold of £242 at the rate of 12%. (In other words, £33 per week at 12%).

Anya’s employer, the chemist, will take this Class 1 NIC from her wages, together with any income tax due, before paying Anya. Anya will also have to pay income tax on her earnings as a dental assistant.

Ali: how the lower limit for NIC works

Ali earns £5,500 per year, but the job is seasonal, so she works a lot at Christmas and on other bank holidays.

During Christmas and Easter week in the 2023/24 tax year, she earns £650, but most other weeks her wages are £100 per week or less.

Ali pays NIC on her earnings of £650 in Christmas and Easter weeks, as in these weeks her earnings exceed the primary threshold.

She does not pay Class 1 NIC on her earnings in the weeks when she earns only £100 per week, as this is less than the primary threshold. Her earnings are also below the lower earnings limit so she will not have a qualifying year for NIC purposes.

Lucy: part-time worker on a low income

Lucy currently earns £110 per week from her part-time job. She pays no tax or Class 1 NIC. Her employer offers her some additional hours. If she accepts the additional hours, she will earn £135 per week. She is worried that she will have to pay Class 1 NIC and the additional work will not be worthwhile.

At present Lucy's earnings are below the lower earnings limit for Class 1 NIC. This means that she is not entitled to contributory benefits and is not accruing qualifying years for state pension purposes unless she receives NIC credits for another reason.

By increasing her hours, Lucy's earnings will rise above the lower earnings limit (£123 per week) for Class 1 NIC purposes. However, as her earnings are below the primary threshold of £242 per week, she does not actually pay Class 1 NIC; instead she pays NIC at zero % and will be treated as having paid NIC, so could then build up a qualifying year for NIC.

This means she could gain entitlement to contributory benefits and potentially a qualifying year for state pension purposes, without having to physically pay out anything in terms of Class 1 NIC. She is also not earning enough to pay any tax, so she will be able to keep the whole of her £135 per week, although it may affect any state benefits that she receives.

However, if her earnings increase above the primary threshold (£242 in 2023/24), she will have to start paying Class 1 NIC at a rate of 12% on the excess.

Kerry: salary sacrifice

Kerry earns £195 per week. Her employer suggests a salary sacrifice scheme whereby she gives up cash salary in exchange for a pension contribution. The amount sacrificed is to be £55 a week.

If she exchanges £55 of cash salary for £55 of pension contributions each week, she will have cash earnings of £140 per week. That would still leave her in the bracket where she would be treated as paying NIC at a zero rate. However, if she sacrificed a further £20 per week of her salary to get additional pension contributions made on her behalf, that will take her earnings below the lower earnings limit and outside the NIC system. This could adversely affect Kerry’s entitlement to contributory benefits, statutory maternity pay, statutory sick pay, and statutory adoption pay and also her state pension entitlement. Kerry could be entitled to some NIC credits instead, that might give entitlement to some benefits, but she would have to review the position carefully.

Her employer might also be in breach of the national minimum wage rules.

Mustafa

Mustafa is a low earner and is confused because although he seems to have earned more than the required amount for a qualifying year, he has been told he doesn’t have a qualifying year.

For employed earnings to count towards a qualifying year for state pension purposes they must be earnings “upon which primary Class 1 contributions have been paid or treated as paid” (and not exceeding the upper earnings limit). The annual threshold for earnings to make a year a qualifying one is defined as 52 times the weekly lower earnings limit for the year. In 2023/24 this is therefore £6,396 (£123 x 52).

Therefore, while he does not need to earn over the lower earnings limit in each and every week of the tax year, weekly earnings below this threshold (or monthly earnings below the monthly threshold, if monthly paid) will not count. Similarly, earnings exceeding the upper earnings limit are also ignored in working out the total amount to be tested against the annual threshold to determine whether the year is a qualifying one. There is no averaging in the calculation.

So for example in 2023/24: if he earns £190.50 a week for 26 weeks of the year, but only £100 a week for the other 26 weeks of the year then although his earnings in total will exceed the £6,396 amount, he will not have a qualifying year. This is because his earnings in weeks where he exceeds the lower earnings limit only reach £4,953 (£190.50 x 26).

On the other hand, he might be able to ‘bank’ 2023/24 as a qualifying year if he earned £350 a week, but for only 20 weeks of the year.

If an employed individual (who is not self-employed) does not have sufficient earnings to make the year a qualifying one, then it is worth seeing if they qualify for National Insurance credits or whether they wish to pay voluntary Class 3 National Insurance contributions to plug any gaps.

Where can I find more information?

If you want information on how to get a NINO, go to How do I get a National Insurance number?.

If you want general information on NIC including details of where you can find out more information, go to What is National Insurance?.

HMRC’s detailed technical guidance on NIC, including the annual maximum calculation, is available in HMRC’s NIC Manual.

You can read more about optional remuneration (salary sacrifice) schemes in HMRC’s Employment Income Manual on GOV.UK.

If you have come from abroad to work in the UK, you can find some information about your NIC position in our migrants section.

It is rare for employees to have overpaid NIC. There is information on how to claim a refund of NIC in the certain limited circumstances that exist in our section What is National Insurance?.