National Insurance Contributions in the UK: The 2023/2024 Guide
National Insurance Contributions (NICs) – we all pay them, but not everyone understands them. Whether you’re an employee, self-employed or a business owner, this guide will explain what NICs are, how they are calculated and how the government uses the money that they generate. We’ve included the latest rates and thresholds for the tax year 2023-2024 for the most up-to-date information.
What are National Insurance Contributions (NICs)?
National Insurance Contributions (NICs) are a type of tax paid by individuals in the UK to fund the state welfare system. NICs are paid by employees, employers and the self-employed which enables individuals to receive benefits from the welfare system, such as access to the National Health Service (NHS), and a State Pension.
Who has to pay National Insurance Contributions in 2023?
If you work in the UK, you must pay NICs unless you are:
- Under the age of 16
- Unemployed
- Earning less than £242 per week
- Over the state pension age (currently 66)
What is the difference between employee NICs and self-employed NICs?
Employee National Insurance Contributions are better known as Class 1 NICs. They are calculated based on primary contributions paid by the employee and secondary contributions paid by their employer. The rates for both primary and secondary contributions are determined by specific thresholds which change annually. We’ve included the most up-to-date rates for 2023 below.
Self-employed individuals pay National Insurance through Class 2 and Class 4 contributions, which are calculated based on their profits. Class 2 NICs are a flat weekly rate of £3.45 that self-employed individuals must pay if their profits exceed the ‘Lower Profits Threshold’ of £12,570 annually. Class 4 NICs are calculated at 9% of self-employment profits above the Lower Profits Limit, and at 2% above an upper limit of £50,270.
Click to view our guide => National Insurance category letters and employee/employer rates for 2023/2024
Employers must also pay 13.8% National Insurance on any expenses and benefits that they give to their employees, such as company cars, health insurance and travel expenses. Visit the Finesse Resources blog for a full breakdown of UK Tax Rates & Thresholds for 2023/2024.
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