DO I HAVE TO PAY NATIONAL INSURANCE CONTRIBUTIONS?
Yes you will be paying National Insurance Contributions if the following applies to you:
- You are 16 or above
- You are earning a certain amount of money by either being employed or self employed or maybe both.
However, the thresholds and the rates to pay National Insurance are different in each case abs that depends on your employment status. The thresholds are as follows:
- Employed and earning a salary of £184 or more per week
Or
- Self employed and you earn £ 6515 or more a year.
Or
- You may be employed and self-employed at the same time, in that case you will be paying NI depending on your combined wages and also depending on the nature of your work.
WHY DO I PAY NATIONAL INSURANCE CONTRIBUTIONS?
You pay National Insurance Contributions because it’s a requirement by the government. It is illegal not to pay NI contributions if you are earning within certain thresholds.
It’s actually for your own benefit and therefore some people also pay class 3 national insurance which is a voluntary contribution so they can stay eligible for certain state benefits which depend on the level of contributions.
The national insurance contributions contribute towards the benefits which you can claim from the government. These benefits include the following:
- Job seekers allowance
- Maternity allowance
- Bereavement allowance
- Incapacity benefit
WHEN AND HOW DO I HAVE TO PAY NATIONAL INSURANCE
The way you pay your NI depends on your employment status.whether you are employed or self employed.
If you are employed and you are paid through PAYE then your employer will deduct the NI and the income tax from your salary and you will get the net salary. The employer will deduct the NI from salary, bonuses,any maternity or paternity pay, sick pay if any and any over time.
If you are self employed, and you pay your income tax through self assessment tax return you will be paying your NI depending on your income calculated in the self assessment tax return and you will pay this annually.
There are 4 types of National Insurance with which you should be familiar with :
Class 1 – paid by employees and employers
Class 2 – paid by self employed
Class 3 Voluntary contribution
Class 4 paid by self employed with profits above a certain amount.
WHAT IF I STOP WORKING WILL I BE LOSING MY ENTITLEMENT TO BENEFITS?
There are certain benefits which are based on the contributions such as job seekers allowance, employment and support allowance and you might lose the entitlement to these if you haven’t paid enough NI contributions.
For state benefits such as state pensions if you have gaps in your national insurance contributions you might still be entitled to the state pension but you might lose some of the benefit.
If you have stopped working you can still pay voluntary contributions to avoid any gaps in your NI contribution records.
If you realise that you have gaps in your NI contribution records you can only pay voluntary contributions for the previous 6 missed years.
If you are employed, self-employed or both and you are looking for an accountant to sort out your taxes, do not hesitate to contact Taxaccolega and our expert team of accountants will be happy to help you. We are accountants based in Croydon, Surrey and London. Call us at 020 8127 0728 or send us a message here.