National Insurance - Employed

Simply put, class 1 is where both the employee and employer pay a contribution, with 1A being employer only contribution and 1B being employee only contribution. So far so simple.

On the assumption that you are standard rate, you pay different percentages on earnings between a multitude of levels. In the same way we plotted income tax pyramids, we just plot earnings against a chart of earning levels -

Apologies the diagram will follow shortly . . .

Please note that I have given the levels as £per week (as per the regulation) and then annual. If you earned £50,000 (see below for what counts as earned for National Insurance contributions) then:

Employee contributions are £4,381.04 broken down into

  • 0% up to £5,304 ie £0
  • 0% from £5,304 to £7,072 ie £0
  • 0% from £7072 to £7,228 ie £0
  • 12% from £7,228 to £40,040 ie £3937.44
  • 12% from £40,040 to £42,484 ie £293.28
  • 12% from £42,484 to £50,000 ie £150.32

Employer contributions are £5,924.06 broken down into:

  • 0% up to £5,304 ie £0
  • 0% from £5,304 to £7,072 ie £0
  • 13.8% from £7072 to £7,228 ie £21.53
  • 13.8% from £7,228 to £40,040 ie £4528.06
  • 13.8% from £40,040 to £42,484 ie £337.27
  • 13.8% from £42,484 to £50,000 ie £1037.20

Rates for each of the bands are given in National Insurance rates.

Where your employer provides an occupational pension scheme, you may have contracted out of what is usually called the second state pension (S2P), formerly known as SERPS. If this is the case you use the contracted out National Insurance rate tables. There are two depending on whether the occupational scheme is money purchase or defined benefit. Again, these tables are given in National Insurance rates.

The final point, as with all taxation is, what is included / excluded from the taxable amount against which National Insurance is charged. For National Insurance, the taxable amount has a very wide definition. Assume all employment income is included, the main exceptions being:

  • Expenses for work, where they are paid by the employee and re-imbursed in full by the employer
  • Employer contribution to occupational pension schem
  • Pension payments from pension scheme