What is National Insurance?
National Insurance is a UK tax on earnings and self-employed profits, paid by workers and employers, which also builds your entitlement to the State Pension and some benefits.
What National Insurance means
National Insurance contributions (NICs) are charged separately from income tax, with their own thresholds and rates. Paying them, or being treated as paying them, builds qualifying years on your record. You normally need 35 qualifying years for the full new State Pension and at least 10 for any.
The main classes for 2026/27 are:
| Class | Who pays | Rate |
|---|---|---|
| Class 1 primary | Employees | 8% on earnings £12,570 to £50,270, 2% above |
| Class 1 secondary | Employers | 15% on earnings above £5,000 |
| Class 1A | Employers, on most benefits in kind | 15% |
| Class 4 | Self-employed | 6% on profits £12,570 to £50,270, 2% above |
| Class 3 | Voluntary, to fill gaps | Flat weekly amount |
Class 2 is no longer compulsory. Self-employed people with profits above the small profits threshold get NI credits automatically; those below can pay it voluntarily.
Example
An employee earns £40,000. Their own NI is 8% of £27,430, which is £2,194.40. Their employer pays 15% of £35,000, which is £5,250, unless the Employment Allowance covers it. A sole trader with £40,000 profit pays Class 4 of 6% of £27,430: £1,645.80.
Why it matters for your business
Employer NI is a real cost of hiring, on top of salary. The Employment Allowance of £10,500 reduces it for eligible employers, but not for companies whose only paid employee above the threshold is a director.
NI is also why directors often take a salary of £12,570 and the rest as dividends: dividends carry no NI at all. Salary sacrifice for pensions works partly because the sacrificed pay escapes NI for both employer and employee.
Your NI number
Your National Insurance number (two letters, six digits, one letter) stays with you for life. Employers need it for payroll and HMRC uses it to track your contributions.
Gaps in your record
Years with low earnings, time abroad or years before you registered for Self Assessment can leave gaps. You can check your record in your HMRC personal tax account, which also shows a State Pension forecast. Gaps can usually be filled with voluntary Class 3 contributions, normally for the last six years. Whether it is worth paying depends on how many qualifying years you already have.
Common questions
No. Dividends are not earnings, so no employee or employer NI is due. They are subject to dividend tax instead, at 10.75%, 35.75% or 39.35% for 2026/27 after the £500 allowance. That is one reason directors often pay themselves a small salary and the rest as dividends.
Employees stop paying their own Class 1 NI once they reach State Pension age, although employers still pay theirs. Self-employed people stop paying Class 4 from the tax year after they reach it. If you work past State Pension age, ask your employer to update your payroll record.