National Insurance Contribution Classes

The National Insurance contributions you are required to make are calculated according to which contribution class your earnings belong. The following definitions of the contribution classes contain references to the earnings scale, such as Lower and Upper Earnings Limit and Primary Threshold. For more information on this topic see The Earnings Scale. The amount you are required to pay will change regularly, as the National Insurance office adapts its thresholds and their values; if in doubt, contact the National Insurance helpline on 0845 302 1479 or ask your financial advisor or local Citizens Advice Bureau for help.

Class One

• If you are aged between sixteen and the State Pension Age and are employed you will pay class one contributions.
  You and your employer pay N.I. contributions, which your employer deducts from your gross salary and sends to Her Majesty’s Revenues and Customs. Not sending these contributions is a criminal offence and could result in prosecution.
• You may pay more or less class one contributions depending on whether you are contracted in or out of the State Second Pension scheme. See Contracting Out.
• Class one contributions are calculated as a percentage of your earnings which fall between the Lower Earnings Limit, currently £87 a week, and the Upper Earnings Limit, currently £670 a week.
• Currently class one contributions for employees are 11% of earnings between the Lower Earnings Limit and the Upper Earnings Limit and 1% of earnings above the Upper Earnings Limit.
• If you earn more than the Lower Earnings Limit but less than the Primary Threshold, currently £100 a week, you will be credited as having paid class one contributions without being required to actually pay them.
• These contributions count towards Jobseeker’s Allowance, Incapacity Benefit, Bereavement Benefits, Maternity Allowance, the State Pension and the State Second Pension.

Class One A

• If you are an employer and your employee is a company director or receives certain taxable benefits from the company such as a company car, a personal loan or private health insurance, and they earn at least £8,500 a year, you will have to pay class one a contributions.

Class Two

• If you are self employed and your earnings are not low enough to exempt you from N.I. contributions, you will pay class two contributions.
• These are currently £2.20 a week, and are usually paid monthly via Direct Debit.
• You may be required to pay a different class two rate if your work is specialised. See Specialised Class Two Contributions.
• If you do not pay these contributions when you are required to do so, you may face a fine or even prosecution.
• You may be required to pay class four contributions as well as class two contributions.
• These contributions count towards the same benefits as class one contributions, with the exception of Jobseeker’s Allowance and the State Second Pension.

Class Three

• These contributions are voluntary and for the tax year 2007/2008 are set at £7.80 a week.
• You can pay these if your earnings are very low and you are thus not required to pay N.I. contributions but are equally not entitled to N.I. credits. See National Insurance Credits.
• You can also choose to pay class three contributions if you have gaps in your National Insurance record, perhaps from time spent studying or travelling.
• If you are unsure as to whether you should pay class three contributions, contact your local Citizens Advice Bureau for help.
• These contributions count towards bereavement benefits and the State Pension.

Class Four

• If you are self employed and earn more than a certain amount each year, known as the Lower Profits Limit, you will pay class four contributions in addition to class two contributions.
• Class four contributions are calculated as a percentage of your earnings which fall between the Lower Profits Limit, currently set at £5,225 a year and the Upper Profits Limit, currently set at £34,840 a year.
• Currently class four contributions are 8% of earnings between the Lower Profits Limit and the Upper Profits Limit and 1% of earnings above the Upper Profits Limit.
• These contributions do not count towards any benefits, but you are required to pay them nonetheless.

Married Women’s Contributions

• If you are a married woman or a widow, you must have applied to pay reduced rate N.I. contributions before the 21st May 1977.
• If you chose to do so, you are entitled to pay reduced rate class one contributions of 4.85% of your earnings between the Lower and Upper Earnings Limits and 1% of your earnings above the Upper Earnings Limit.
• If you are self-employed and registered for married women's contributions you do not need to pay class two contributions.
• You may be entitled to less state benefits and a lower rate State Pension as a result of these reduced contributions.
• If you are considering changing to full-rate contributions in order to build up more State Pension or State Second Pension contact your local Citizens Advice Bureau for assistance.