Table of Contents
National Insurance (NI) is one of the most important taxes in the UK, yet many people have only a vague understanding of what it actually is, how much they pay, and what they get in return. This comprehensive guide explains everything you need to know about National Insurance in 2025, from the rates and thresholds to how contributions protect your State Pension entitlement.
What Is National Insurance?
National Insurance is a system of contributions paid by employees, employers, and the self-employed in the United Kingdom. It was introduced in 1948 as part of the post-war welfare state and is administered by HM Revenue and Customs (HMRC). NI contributions go into the National Insurance Fund, which is used to pay for:
- State Pension — the main retirement benefit for UK residents
- Jobseeker's Allowance (JSA) — for those seeking work
- Employment and Support Allowance (ESA) — for those unable to work due to illness or disability
- Maternity Allowance — for self-employed and some other mothers
- Bereavement Support Payment — for surviving spouses and civil partners
Despite being called an "insurance", National Insurance is effectively a tax on earnings. There is no direct link between what you pay in and what you receive — but there is a link between the number of years you contribute and your State Pension entitlement. This makes understanding your NI record genuinely important for your long-term financial security.
NI Rates and Thresholds 2025/26
For the 2025/26 tax year, the National Insurance thresholds and rates for employees (Class 1) are as follows. These thresholds have been frozen until 2028, meaning that as wages rise, more workers are pulled into higher bands — a process known as fiscal drag.
| Earnings Band (Annual) | Weekly Equivalent | NI Rate (Employee) |
|---|---|---|
| Up to £12,570 (Lower Profits Limit / Primary Threshold) | Up to £242 | 0% |
| £12,570 to £50,270 | £242 to £967 | 8% |
| Above £50,270 (Upper Earnings Limit) | Above £967 | 2% |
It is worth noting that the employee NI rate was reduced from 12% to 10% in January 2024, and then further to 8% from April 2024. These cuts represented the largest reduction in NI in over 30 years.
Employer NI Rates 2025/26
Employers also pay National Insurance on their employees' wages. From April 2025, significant changes were made to employer NI:
| Threshold | 2024/25 | 2025/26 |
|---|---|---|
| Secondary Threshold (employer NI kicks in) | £9,100/year | £5,000/year |
| Employer NI Rate | 13.8% | 15% |
| Employment Allowance | £5,000 | £10,500 |
The increase in employer NI from 13.8% to 15%, combined with the reduction in the secondary threshold from £9,100 to £5,000, means employers pay significantly more NI per employee from April 2025. The Employment Allowance — available to smaller businesses — was increased to £10,500 to partially offset this increase.
How NI Affects Your Take-Home Pay
National Insurance is deducted from your gross pay by your employer before you receive it — just like income tax under PAYE. To illustrate the impact on take-home pay, here are some examples for 2025/26:
| Annual Salary | Taxable NI | Annual NI (Employee) | Monthly NI Deduction |
|---|---|---|---|
| £20,000 | £7,430 | £594 | £50 |
| £30,000 | £17,430 | £1,394 | £116 |
| £40,000 | £27,430 | £2,194 | £183 |
| £50,270 | £37,700 | £3,016 | £251 |
| £60,000 | £37,700 + £9,730 | £3,212 | £268 |
Classes of National Insurance
National Insurance is divided into different "classes" depending on your employment status and earnings. Understanding which class applies to you is essential for knowing what you are contributing and what you are entitled to.
Class 1
Paid by employees and employers. Deducted automatically via PAYE. Builds entitlement to State Pension and contributory benefits.
Class 2
Paid by self-employed people with profits of £12,570 or more. A flat rate of £3.45 per week in 2025/26. Builds State Pension entitlement.
Class 3
Voluntary contributions to fill gaps in your NI record. Currently £17.45 per week (2025/26). Does not give entitlement to contributory benefits.
Class 4
Paid by self-employed people on profits above £12,570. Rate is 6% on profits between £12,570 and £50,270, then 2% above £50,270.
Class 1A and Class 1B
There are also two additional employer-only classes:
- Class 1A: Paid by employers on taxable benefits in kind (such as company cars or private medical insurance) at 13.8% (15% from April 2025).
- Class 1B: Paid by employers who have a PAYE settlement agreement with HMRC covering certain employee benefits.
NI and the State Pension
Your National Insurance record is the primary factor determining your State Pension entitlement. The new State Pension (for those who reached State Pension age on or after 6 April 2016) works as follows:
| Qualifying Years | State Pension Entitlement | Weekly Amount (2025/26) |
|---|---|---|
| Fewer than 10 years | No State Pension | £0 |
| 10 years | Minimum partial pension | ~£63.20 |
| 20 years | Partial pension | ~£126.40 |
| 35 years (full) | Full new State Pension | £221.20 |
The full new State Pension in 2025/26 is £221.20 per week (£11,502.40 per year), representing a 4.1% increase due to the triple lock guarantee, which increases the State Pension by the highest of: inflation (CPI), earnings growth, or 2.5%.
Each qualifying year adds approximately £6.32 per week to your State Pension (£221.20 ÷ 35 qualifying years). This is a significant return on investment, particularly for voluntary contributions.
State Pension Age
The current State Pension age is 66 for both men and women. It is scheduled to rise to 67 between 2026 and 2028, and then to 68 in the future (though the government continues to review this timeline). You can check your personal State Pension age at gov.uk.
National Insurance Credits
National Insurance credits are a way of adding qualifying years to your NI record when you are not working or earning enough to make contributions. They are crucial for protecting your State Pension entitlement during periods when you cannot pay NI.
Who Can Get NI Credits?
You may automatically receive NI credits if you:
- Claim Child Benefit for a child under 12
- Receive Jobseeker's Allowance (contribution-based or income-based)
- Receive Employment and Support Allowance
- Receive Carer's Allowance
- Are on Statutory Sick Pay but earning below the Lower Earnings Limit (£6,396 in 2025/26)
- Are a foster carer
- Are on jury service
- Are a partner of someone in HM Armed Forces
Specified Adult Childcare Credits
A grandparent or other family member who looks after a child under 12 while the parent is working may be able to apply for Specified Adult Childcare credits. These credits are transferred from the parent's NI record (who does not need them, as they are already earning NI credits through work) to the grandparent. This is particularly valuable for grandparents who are not yet at State Pension age.
Gaps in Your NI Record
A gap in your NI record occurs when you have a year in which you did not make sufficient NI contributions and did not receive NI credits. Common reasons for gaps include:
- Years spent working abroad
- Self-employment with low profits (below the Small Profits Threshold of £6,725 in 2025/26)
- Career breaks (not covered by credits)
- Zero-hours contracts with inconsistent earnings below the Lower Earnings Limit
- Being in education or training without claiming relevant benefits
A gap means that year does not count as a qualifying year towards your State Pension. If you already have 35 or more qualifying years, additional gaps make no difference. However, if you have fewer than 35 qualifying years, each gap potentially reduces your State Pension entitlement by approximately £6.32 per week.
Voluntary NI Contributions
If you have gaps in your NI record that are reducing your State Pension entitlement, you can pay voluntary Class 3 contributions to fill them. The cost and potential benefit are as follows for 2025/26:
| Item | Amount |
|---|---|
| Class 3 voluntary rate (2025/26) | £17.45 per week |
| Cost to fill one full gap year | ~£907 |
| Additional State Pension per week | ~£6.32 |
| Additional State Pension per year | ~£329 |
| Break-even point (years to recoup cost) | ~2.8 years |
Given the break-even point of less than three years, paying voluntary contributions is almost always worthwhile if you are short of the 35 qualifying years needed for the full State Pension, provided you live beyond your early 70s. The return on investment is exceptional compared to most savings products.
Deadlines for Filling Gaps
Normally, you can only pay voluntary contributions to fill gaps in the previous six tax years. However, a temporary extension was put in place allowing people to fill gaps going back to 2006/07 — this extended deadline was initially April 2025 and has been subject to further government announcements. Always check gov.uk for the current deadline before making decisions.
Class 2 Voluntary Contributions for the Self-Employed
Self-employed people with low profits (below £6,725) can pay voluntary Class 2 contributions at just £3.45 per week — significantly cheaper than Class 3 contributions. This gives them the same State Pension entitlement as paying Class 3, making it an even better deal for those who qualify.
How to Check Your NI Record
You can check your National Insurance record online through the HMRC Personal Tax Account or the Government Gateway. Here is what you can see:
- Your total number of qualifying years
- The years in which gaps exist
- Your State Pension forecast based on your current record
- How many more qualifying years you need for the full State Pension
- Whether voluntary contributions would increase your State Pension
To access your NI record, go to gov.uk/check-national-insurance-record. You will need a Government Gateway user ID and password. If you do not have one, you can create one during the process — you will need your National Insurance number and some identifying information such as a passport or payslip.
Calculate Your NI and Take-Home Pay
Use our free National Insurance calculator to see exactly how much NI you pay and how it affects your net salary for 2025/26.
Use NI Calculator →Special Cases and Exemptions
NI and State Pension Age
Once you reach State Pension age (currently 66), you stop paying Class 1 NI contributions, even if you continue working. Your employer continues to pay employer NI on your salary. If you are self-employed and reach State Pension age, you also stop paying Class 2 and Class 4 contributions.
Directors and NI
Company directors are treated as employees for NI purposes but have their NI calculated on an annual basis rather than per pay period. This means that if a director takes a large dividend early in the year and no salary, they may pay a different pattern of NI compared to a salaried employee.
NI and Zero-Hours Contracts
Workers on zero-hours contracts only pay NI when their weekly earnings exceed the Lower Earnings Limit (£123 per week / £6,396 per year in 2025/26). However, you only receive a qualifying year for State Pension purposes if your annual earnings in that employment exceed £6,396. This can create gaps in the NI records of those in insecure employment.
NI for Workers from Abroad
People who come to work in the UK from abroad pay NI in the same way as UK residents from day one of employment. Some countries have reciprocal social security agreements with the UK that may affect your liability — particularly relevant for workers from EU countries, the USA, Canada, and other nations with bilateral agreements.
Impact of NI Changes Over Time
National Insurance has changed substantially in recent years. Here is a summary of recent and upcoming changes:
| Date | Change | Impact |
|---|---|---|
| July 2022 | Primary threshold raised from £9,880 to £12,570 | Saving of up to £330/year for employees |
| January 2024 | Employee main rate cut from 12% to 10% | Average worker saved ~£450/year |
| April 2024 | Employee main rate cut further to 8% | Additional saving of ~£450/year |
| April 2025 | Employer rate raised 13.8% to 15%; secondary threshold cut to £5,000 | Employers pay more; Employment Allowance doubled to £10,500 |
| April 2028 | Threshold freeze expected to end | Possible real-terms change to tax burden |
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