National Insurance Contributions (NIC) are essentially a tax on any income that you earn over a certain level that go towards an array of benefits, including the state pension.
The system is divided into three different classes:
- Class 1 contributions are payable on earnings from employment
- Class 2 and 4 are payable on the profits gained from self-employment
- Class 3 contributions are voluntary payments
We understand that as a contractor, you won’t have the time in your hectic WorkStyle to know the rules inside out. That’s why we’ve created this handy guide that outlines everything you need to know.
Employees are charged Class 1 NIC on everything they earn, while employers have to pay a secondary contribution. The below tables outline how much tax employers and employees are charged.
|Earnings 2019/20||Tax rate charged|
|£118 to £166 per week (£512 to £719 per month)||0%|
|£166.01 to £962 per week (£719.01 to £4,167 per month)||12%|
|Over £962 per week (£4,167 per month)||2%|