National Insurance Introduction

National insurance (NI) contributions were designed to contribute towards certain social security benefits such as state pension. These social security benefits are “contributory benefits” ie where the claimants contribution record determines the availability and amount of the benefit. While National Insurance is a personal tax, it does not interact with the other taxes in the way that earned income and interest income do.

National Insurance - Class of Contribution

Every explanation I have seen explains NI as classes 1,1A,1B, then 2,3,4. And I found them baffling. I will explain this in a more logical order ie 2,3 then 1,1A,1B  then 3. Please read on and decide whether this order is logical.

The National Insurance system is very different for the self employed (ie sole traders) and the employed. If you work for yourself through a limited company then you are employed for our purposes here.