What do you think of the LITRG website?
What are National Insurance contributions?
National Insurance contributions (NIC) help to pay for, and give you entitlement to, some state benefits. In this part, we provide a summary of National Insurance and the different types and explain how they apply to you.
For more information on NIC go to What is National Insurance? in the tax basics section.
What are National Insurance contributions?
National Insurance is similar to income tax, but it helps to pay for some state benefits at times when individuals need help, for example, when unemployed, ill, in retirement or on bereavement.
In the UK, you start paying NIC from the age of 16 once your earned income reaches a certain level. NIC is payable on earnings, not on investment income such as bank interest or rental income.
There are six different 'classes' (or types) of NIC. The type of NIC you pay depends on your circumstances – for example, whether you are employed self-employed or are paying NIC voluntarily to make up gaps in your NIC record. You can find out more about the different types of NIC, and the rates they are payable at, in our tax basics section.
National Insurance contributions are not deductible when determining taxable income for either the employed or self-employed, nor do you get National Insurance relief on self-funded employment expenses for example, as you may do for tax in limited circumstances.
Please note that under PAYE, your National Insurance deductions are unlikely to be wrong. National Insurance is not recalculated against annual thresholds, as is the case for tax.
Will I have to pay National Insurance if I am working in the UK?
Most people who work in the UK are liable to NIC as soon as they start work if they have a UK employer.
Some international assignees who are sent to the UK to work by their employers remain subject to their home country social security legislation rather than pay UK contributions. Similar rules apply if you are self-employed and come to work temporarily in the UK.
If you remain employed overseas while working in the UK (for example, if you are assigned to the UK by a non-UK employer), the applicable rules depend on whether your home country is either (a) an EEA country or Switzerland – though see below in light of the UK’s departure from the European Union, (b) a country other than those in the EEA or Switzerland but one with which the UK has a social security agreement, or (c) any other country (known as ‘rest of world’ countries).
▶️ Where your home country is an EEA country (or Switzerland), the position further depends on whether or not you are within scope of the UK’s withdrawal agreement from the European Union and hence whether the co-ordinated EEA social security rules can apply. The EU commission has published some guidance on who is in scope of the agreement, but we recommend you seek advice according your personal circumstances.
If the co-ordinated EEA social security rules do not apply, then the position will be determined as a result of negotiations between the UK and the European Union in relation to future co-ordination of social security beyond the end of the transition period (at the time of writing, this is 31 December 2020).
Your National Insurance position in each of the above three cases is as follows:
- EEA/Switzerland (where co-ordinated EEA social security rules apply). You normally remain insured in your home country for an assignment of up to two years by default, or up to five years by exception. Please see What if I am a posted worker from the EU, Norway, Iceland, Liechtenstein or Switzerland?.
Non-EEA/Switzerland country with which the UK has a social security agreement. You normally remain insured in your home country for the period specified in the agreement (which can be up to five years). Please see What if I come from a non-EEA country with which the UK has a social security agreement?.
‘Rest of world’ country. You are normally exempt from UK NIC for the first 52 weeks. Please see What if I come from a country with no social security agreement with the UK?.
However, if you are employed in the UK on a local UK contract, then you are generally liable to UK NIC from day one, regardless of the country you are from.
How do I check my National Insurance record?
HM Revenue & Customs (HMRC) keep a record of the NIC individuals pay. It is possible for an individual to check their own NIC record.
If you are living in the UK go to the tax basics section for details.
If you are living abroad, you can send an online enquiry or write to the National Insurance International Caseworker at the National Insurance Contributions Office. Find out how from GOV.UK.
What are National Insurance credits?
You can find out about National Insurance credits in the tax basics section.
What are voluntary contributions?
If you are not working or receiving NIC credits, you can choose to pay voluntary NIC in certain circumstances.
For example, Class 3 contributions can be paid on a voluntary basis if an individual leaves the UK, so that they can continue to build a UK state pension.
To be able to pay Class 3 NIC on a voluntary basis when you leave the UK, you need to satisfy either of the following conditions:
- you have lived in the UK for a continuous three-year period at any time before the period for which NIC is to be paid. (If you have lived or worked in another EEA country or in Turkey, time spent there might help you to meet this condition); or
- before you went abroad, you paid a set amount in NIC for three years or more.
Class 2 NIC can also be paid on a voluntary basis if an individual leaves the UK. However, this only applies where you will be self-employed or employed abroad. Class 2 contributions are cheaper than Class 3 contributions and actually protect more benefits than Class 3, so if you want to pay NIC on a voluntary basis, and will be employed or self-employed in some form whilst overseas, it may be cheaper to pay Class 2 NIC.
You can find more on paying UK NIC and qualifying for contributions whilst you are abroad in HMRC booklet NI38, which is available on GOV.UK.
How does National Insurance work if I have more than one job?
If you would like information on how NIC works if you have more than one job, please see our factsheet: Having more than one job.
Is it possible to get a refund of NIC or transfer NIC to another country?
Migrants who work in the UK are normally liable to NIC. It is not usually possible to obtain a refund of any of the NIC paid, unless they have been paid in error.
The period during which NIC is paid might be taken into account, however, when determining eligibility to state benefits in another country. If you are returning to a country within the EEA, you will need to determine whether you can ‘aggregate’ periods of contributions in this way under the terms of the UK’s withdrawal agreement from the European Union. There is more information on this at How does the UK state pension work for migrants? though we recommend you seek advice based on your personal circumstances.
Alternatively, you may be able to take periods of contributions into account for determining benefit eligibility if you are returning to a country that has a social security agreement with the UK.