If you’re an employee you see them every month in your pay slip. You may wonder what they’re for, are they just another Income Tax, but our National Insurance contributions pay for the many state benefits that we have in the UK. Certain benefits can only be claimed if you have contributed towards your national insurance record, for example, the state pension. To qualify for the full new state pension, you will need to have contributed for a minimum of 35 years.
The contributions are payable by anybody in employment or self-employed aged between 16 and the state retirement age. Employers also pay employers’ national insurance in respect of their employees.
Just like Income Tax, the amount of National Insurance you need to pay depends on your earnings, including some benefits in kind if you are an employee, or profits if you are self-employed. But unlike Income Tax there are different classes of contributions that are payable that depend on whether you’re an employee, employer or self-employed.
Director/owners of companies must ensure that they are structuring their tax affairs to make the necessary contributions in order to qualify for state benefits.
Individuals who are both employed and self-employed or multiple employments, need to be careful that they do not overpay their National Insurance Contributions. Anyone with a significant gap in their record, perhaps because they had a career break, may need to make up any short fall in their contributions.
Would your time be better spent with you clients and customers as opposed to worrying about whether you’re contributing enough to your National Insurance? Of course, and that’s why your local AIMS Accountant can deal with it for you leaving you free to focus on your business.