National Insurance Contributions (NIC)
Tax on the income of employees, self employed and employers
NIC Class 2
- Flat rate voluntary payment by self-employed.
- Someone who is self-employed with profits equal to or above the small profits threshold (SPT) is treated as having paid Class 2 NICs to protect their NI record. They do not have to pay Class 2 contributions.
- Someone who is self-employed with profits below the SPT can choose to pay Class 2 NICs voluntarily. The payment is a flat rate of £3.50 per week in 2025/26.
NIC Class 3
Voluntary contributions to maintain or improve rights to benefits; that can be made to fill any gaps in an individual’s
contribution record, although they can only usually be paid for gaps for the past six years.
The current rate is £17.75 per week.
NIC Class 4
Paid by self-employed on assessable profits in excess of the lower limit. The rate paid is 6% on profits that fall between £12,570 and £50,270 (2025/26) plus an extra 2% on profits over £50,270.
NICs are payable above the primary threshold of:
£12,570
What benefits qualify for someone who pays Class 1 NIC
Sickness benefits
State pension
What are the % payments of NIC
- 10% on earnings between (PT) £242 per week & (UEL) £967 per week
- Further 2% on earnings above £967
How long must an individual pay national insurance to receive new state pension
35 years
How many sick days must an employee have to be eligible for SSP
3 consecutive days
NIC Class 1 primary
Payable by employees as a percentage of their earnings
NIC Class 1 secondary
Payable by employers as a percentage of the employee’s earnings
Class 1 primary threshold?
£242/week; £1048/month; £12,570/year
Employees pay:
* no NICs on earnings below the PT;
* 8% on earnings between the PT per week and the upper earnings limit of £967 per week;
plus
* 2% on earnings over £967 per week (which equates to £4,189 per month and £50,270
annually) with no limit.
If an employee earns between £
NIC Class 1 secondary principles?
- Employers do not pay Class 1 NICs in relation to employee earnings below £96 per week;
and
- Employers generally pay contributions on all employee earnings above £96 per
week at 15%.
What is NICO
National Insurance Contributions Office (part of HMRC
What is SPT
Small Profits Threshold - £6,845
How does providing State benefits affect voluntary financial planning
- receipt of State benefits may reduce the level of necessary private financial provision for illness, retirement or death; but
- the low level of State benefits frequently emphasises the need for private financial provision.
Define Universal Credit
- Introduced 2013
- Aims to simplify/streamline benefit system by combining/replacing Child Tax Credit, Housing Benefit, Income Support, Working Tax Credit, Income-based Jobseekers Allowance
What are UC’s aims
- Improve incentive to work
- Make easier to move in/out of work
- Easier to understand than previous benefits system
- Reduce poverty among those on low incomes
- Cut back on benefit fraud / error
- More cost-effective to run
Who is UC available to
Universal Credit is available to those who:
* are on a low income or need help with living costs, whether they are in or out of work;
* over 18 (although there are some exceptions for those aged 16 to 17);
* are under State Pension age (or their partner is);
* have less than £16,000 in savings and investments (the claimant or their partner); and
* live in the UK.
What is Child Benefit
Payable to those responsible for child under 16, or under 20 if still in education
- £26.06/week per first child
- £17.25/week per subsequent children
- non-contributory and paid tax-free
- can be back-dated for up to 3 months if not claimed when entitled
What is High Income Child Benefit Charge
For every £200 earned over £60,000, (highest earning parent), 1% of amount of Child Benefit received - adjust for NET income
