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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Part time employment: NIC

If you are employed part-time and only work a few hours a week, you may not earn enough 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. Here we look at the NIC implications.

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Earning less than the lower earnings limit

As we explain on our NIC for employees page, if you work part-time and 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). This means your entitlement to contributory benefits or the state pension could be affected if you are not otherwise entitled to NIC credits.

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 £6,396 (£123 x 52).

Therefore, while you do 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.

Example

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

In 2023/24, 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. 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 have been able to ‘bank’ 2023/24 as a qualifying year if he had earned, say, £350 a week for only 20 weeks of the year.

Earning more than the lower earnings limit

As we explain on our NIC for employees page, if your earnings are between the lower earnings limit and the primary threshold, you enjoy the benefits of the NIC system without the costs.

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. 

Example

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 a nil rate 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 actually 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.

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.

Seasonal workers coming to the UK

Seasonal workers who come to the UK from overseas will normally be liable to pay NIC on their UK earnings, unless they earn less than the primary threshold (£242 per week or £1,048 per month for 2023/24). Unlike income tax, NIC is generally assessed per pay period rather than annually.

Therefore, if you are a seasonal worker and only work in the UK for part of the tax year, you cannot usually get a refund of the NIC.

If you paid NIC during your time in the UK, however, the contributions may help to determine whether you are eligible for benefits under another country’s social security system.

There is more information in our page NIC in cross-border situations.

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