What is National Insurance?

National Insurance (NI) contributions fund state benefits including the State Pension, Statutory Sick Pay and the NHS. Employees pay Class 1 NI on earnings above the Primary Threshold; employers pay additional Class 1 contributions. Self-employed people pay Class 2 (a flat weekly rate) and Class 4 (a percentage of profits above a threshold). NI is administered by HMRC and deducted through PAYE for employees. The number of qualifying years of NI contributions determines entitlement to the full new State Pension, making it important to track gaps in your record.