What Are National Insurance Contributions (NICs)?

National Insurance contributions, usually shortened to NICs, are a UK tax on earned income that funds the state pension and a handful of contributory benefits. If you work as an employee and earn above £242 a week in the 2025-to-2026 tax year, your employer deducts them from your pay automatically. If you’re self-employed, you pay them through your Self Assessment return. What you pay over your working life directly shapes what you can claim later, particularly your state pension.

What Your Contributions Actually Pay For

NICs go into the National Insurance Fund, which sits separately from the general tax pot that pays for schools, defence, and day-to-day public services. The Fund’s biggest job is the state pension, currently £230.25 a week for someone with 35 qualifying years.¹ It also pays contributory Jobseeker’s Allowance for people who lose their jobs, Maternity Allowance, and Employment and Support Allowance for those unable to work through illness.

One thing worth knowing early: NI only applies to earned income from employment or self-employment. Savings interest, rental income, and investment dividends are outside the system. And once you reach state pension age, you stop paying NI entirely, even if you keep working. Income tax carries none of those exemptions.

The Classes of National Insurance

The system sorts people into classes based on how they earn.² Each class has its own rates, thresholds, and benefit entitlements.

Class 1 covers employees. Your employer deducts it from your wages when you earn above the Primary Threshold, and pays a separate employer contribution on top. This class builds entitlement to the widest range of benefits.
Class 2 was the flat-rate self-employed contribution. From 6 April 2024, self-employed workers no longer have to pay it, though NI is treated as paid so the contribution record still builds. Anyone with profits below the small profits threshold of £6,725 can still pay Class 2 voluntarily to protect their record.³
Class 3 is voluntary. Anyone can pay it to fill gaps in their record and protect their state pension. In the 2025-to-2026 tax year it costs £17.75 a week.⁴
Class 4 is the main NI payment self-employed people make. It’s charged on annual profits above £12,570 and the rate scales with income.

Employee Rates and Thresholds for 2025-to-2026

You start building an NI record once you earn at least the Lower Earnings Limit of £125 a week, or £6,500 a year, even though nothing is deducted at that level. Cash deductions start once you pass the Primary Threshold of £242 a week (£12,570 a year).⁵

Between the Primary Threshold and the Upper Earnings Limit of £967 a week (£50,270 a year), the rate is 8% on every pound. Above the Upper Earnings Limit it drops to 2%.⁵ Someone earning £40,000 pays 8% on the portion between £12,570 and £40,000. Someone on £60,000 pays 8% up to £50,270 and then 2% on the remaining £9,730.

Your employer pays a separate contribution you never see on your payslip. From April 2025 the employer rate is 15% on earnings above the Secondary Threshold, up from 13.8%, and the Secondary Threshold itself dropped significantly.⁵

Self-Employed Rates

If you work for yourself, your main NI bill is Class 4, calculated on annual profits through Self Assessment. In 2025-to-2026 that’s 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.⁶ The main rate is lower than the 8% employees pay, but there’s no employer contribution alongside it.

How Contributions Build Your State Pension

To get any state pension at all, you need at least 10 qualifying years of NI contributions or credits. To get the full new state pension of £230.25 a week, you need 35 qualifying years.¹ Between 10 and 34, you get a proportional amount. Twenty qualifying years, for instance, gets you roughly 20/35ths of the full rate.

You can check where you stand through your Personal Tax Account on GOV.UK. It shows your qualifying years, any gaps, and a forecast of what you’ll receive.⁷ You’ll need a passport or driving licence to prove your identity the first time. Do this well before retirement, because filling gaps has deadlines.

Credits When You’re Not Working

Not everyone can pay NI through work every year. Credits fill in periods of unemployment, illness, or caregiving so those years still count toward your pension.⁸

Most credits arrive automatically. Claim Jobseeker’s Allowance, Employment and Support Allowance, or Carer’s Allowance, and your record is credited for those weeks. Parents and carers claiming Child Benefit for a child under 12 get credits too, which is one of the strongest reasons to claim Child Benefit even if your income is high enough to trigger the High Income Child Benefit Charge. Jury service and statutory maternity, paternity, or adoption pay also earn credits.

Specified Adult Childcare Credits

If a grandparent, aunt, uncle, or other eligible family member regularly looks after a child under 12 so the parent can work, that family member can pick up NI credits transferred from the parent’s Child Benefit claim.⁹ The carer has to be under state pension age, and the parent confirms they don’t need the credits themselves. You apply using form CA9176 after 31 October following the end of the relevant tax year. A grandparent who provided years of childcare without claiming these credits could be missing several qualifying years, and it’s worth checking retrospectively.

Filling Gaps With Voluntary Contributions

If your record has gaps, you can plug them with voluntary Class 3 contributions at £17.75 a week for 2025-to-2026.⁴ A full year costs roughly £923 and buys one qualifying year, which can be a strong return on a pension that pays out for decades.

The window is limited. You can generally only fill gaps from the past six tax years, with a 5 April deadline each year.¹⁰ Once that window closes for a given year, it’s gone. Before paying, check whether you actually need the extra year: if you’re already on track for 35 qualifying years by retirement, more won’t increase your pension.

Paying National Insurance While Abroad

Move abroad and your UK NI record stops building unless you arrange to keep paying. You may be able to pay voluntary contributions from overseas if you previously lived in the UK for at least three consecutive years or paid at least three years of NI.¹¹

A change is coming on 6 April 2026: the cheaper voluntary Class 2 option for time spent abroad disappears. From 2026-to-2027 onwards, only Class 3 will be available for periods overseas.¹¹ If you’re currently abroad and eligible for Class 2, paying up before that deadline is worth considering.

Where you retire matters for pension increases too. Retire in the EEA, Gibraltar, Switzerland, or a country with a UK social security agreement, and your pension goes up each year with the annual uprating. Retire somewhere without such an agreement and it’s frozen at the rate you started with.¹²

When You Stop Paying

Reach state pension age and you generally stop paying NI, even if you carry on working.¹³ Employees show their employer proof of age, such as a birth certificate or passport, or ask HMRC for a confirmation letter. For the self-employed, Class 4 stops from the start of the next tax year after reaching state pension age.

Income tax doesn’t stop. You’ll still owe it on wages, pension income, and other taxable sources. The NI exemption is the only tax break that comes with age.

Your National Insurance Number

Everyone in the system has a unique NI number for life. It follows a set format: two letters, six digits, and a final letter, such as QQ 12 34 56 C.¹⁴ Every contribution and credit is linked to it. Most UK residents receive theirs by post shortly before their 16th birthday. It doesn’t change if you move, change your name, or leave the country.

Lost it? You can retrieve it through your Personal Tax Account or the HMRC app by proving your identity with a passport or driving licence. If you can’t verify online, HMRC posts your number to the address on file, taking up to 10 working days in the UK or 21 working days abroad.¹⁵ You can also submit form CA5403 online. HMRC will not give the number out over the phone or by webchat, so don’t waste time calling.

1
GOV.UK. Benefit and Pension Rates 2025 to 2026
2
legislation.gov.uk. Social Security Contributions and Benefits Act 1992
3
GOV.UK. A6/2024 The Social Security Class 2 National Insurance Contributions Consequential Amendments and Savings Regulations 2024
4
GOV.UK. Voluntary National Insurance – Rates
5
GOV.UK. Rates and Thresholds for Employers 2025 to 2026
6
GOV.UK. Self-Employed National Insurance Rates
7
GOV.UK. Check Your National Insurance Record
8
legislation.gov.uk. The Social Security (Credits) Regulations 1975
9
GOV.UK. Apply for Specified Adult Childcare Credits
10
GOV.UK. Voluntary National Insurance – How and When to Pay
11
GOV.UK. Apply to Pay Voluntary National Insurance Contributions When Abroad (CF83)
12
nidirect. Living or Working Overseas and the State Pension
13
GOV.UK. National Insurance and Tax After State Pension Age – Stop Paying National Insurance
14
GOV.UK. Your National Insurance Number
15
GOV.UK. Find Your National Insurance Number