Category: National Insurance

The Employment Allowance can help eligible employers reduce their National Insurance costs by up to £10,500 each tax year. The allowance reduces an employer’s Class 1 National Insurance liability and is applied automatically through payroll once a valid claim has been made.

Most businesses can claim, provided they do not carry out more than half of their work in the public sector. Public sector bodies are generally excluded. Charities, including community amateur sports clubs, and employers of care or support workers may also qualify. In addition, the old £100,000 restriction on employers’ Class 1 National Insurance liabilities was removed from April 2025 meaning more employers are able to benefit from the allowance. 

There remain certain employers that cannot claim such as companies where the only employee liable for secondary Class 1 National Insurance is the sole director. The allowance cannot be claimed for certain employees, such as workers caught by the off-payroll working rules or those employed for personal or domestic work, unless they are providing care or support.

Employers must claim the allowance each tax year. The earlier a claim is made, the sooner the saving can be used against payroll costs. Claims are made through payroll software by submitting an Employment Payment Summary (EPS) to HMRC.

Eligible employers can also make claims for the previous four tax years, subject to the relevant conditions. 
 

Employers are reminded that Class 1A National Insurance contributions (NICs) for the 2025–26 tax year must be paid by 19 July 2026 (or 22 July 2026 if paying electronically) to avoid penalties. These payments relate to the benefits in kind provided to employees and directors, and on Class 1A NICs on benefits, termination payments and sporting testimonial payments.

Class 1A NICs are payable on most taxable benefits in kind such as company cars, private medical insurance and other employment-related benefits provided to employees, directors, and their families or household members. 

They are also due on the taxable element of certain termination payments above £30,000, where Class 1 NICs have not already been paid. In addition, employers should note that Class 1A NICs may also apply to sporting testimonial and similar payments, depending on how they are treated under employment income rules.

To ensure payments are allocated correctly, employers must use their Accounts Office reference number and clearly identify the relevant tax year. Class 1A NICs paid in July will always relate to the preceding tax year.

The important dates to be aware of for 2025–26 Class 1A NICs are:

• 6 July 2026 – Submission deadline for forms P11D and P11D(b)
• 19 July 2026 – Deadline for postal payments to reach HMRC
• 22 July 2026 – Deadline for electronic payments to clear HMRC’s bank account

Employers should ensure both reporting and payment obligations are met on time to avoid penalties and interest charges.

Your National Insurance record can be checked online to see what contributions and credits you have built up and whether you have any gaps that may affect your State Pension.

The record shows how much National Insurance you have paid up to the start of the current tax year, as well as any National Insurance credits you have received. It also highlights whether any years do not count as qualifying years for your State Pension.

By reviewing your record, you can see if paying voluntary contributions could help fill gaps and improve your State Pension entitlement. The service also provides a State Pension forecast and shows how this may change if you choose to make additional payments, including whether you can pay online and how much it may cost.

To access the service, you need to sign in or create a Government Gateway or GOV.UK One login. You may be asked to verify your identity using photo ID such as a passport or driving licence.

You can also request a printed National Insurance statement online, by phone or by post, although you cannot request details for the current or previous tax year. 

Many people are unaware that gaps in their National Insurance (NI) record can affect their entitlement to the State Pension and certain state benefits. In some cases, it may be worthwhile to consider making voluntary NI contributions to fill these gaps.

Gaps can arise for a number of reasons, including periods of low earnings, unemployment without claiming benefits, self-employment with small profits, or time spent living and working abroad. If sufficient qualifying years are not built up, this could reduce the amount of State Pension ultimately received.

Voluntary contributions can help increase State Pension entitlement, particularly for those approaching retirement age who do not have enough qualifying years, or those who expect to fall short of the years needed for a full State Pension. They may also be worth considering for individuals living overseas who wish to maintain their entitlement to UK pension benefits.

However, paying voluntary contributions does not always provide a benefit. For example, some individuals who were contracted out of the State Pension system may see little or no increase in their pension entitlement. Before making any payment, it is important to review your National Insurance record and obtain a State Pension forecast.

Taxpayers should also check whether they are entitled to National Insurance credits, as these may fill gaps without the need to make voluntary contributions. Taking advice before paying can help ensure that any contributions serve a useful purpose.

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs).  Class 4 NICs are payable if their profits are £12,570 or more a year.

Class 4 NIC rates are currently 6% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

• People under the age of 16 at the beginning of the year of assessment.
• People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that tax year.
• People receiving profits in their capacity as a trustee, executor or administrator of a person liable to tax under ITTOIA2005/S8.

The mandatory payment of Class 2 National Insurance Contributions (NICs) for the self-employed was abolished effective from 6 April 2024. It can be advantageous for some self-employed people who do not pay NICs through self-assessment to make voluntarily Class 2 NICs. This can help them to access certain contributory benefits including the State Pension. It is important to confirm that this would be beneficial before making any voluntary payment. The current 2026-27 weekly rate for making voluntary Class 2 NICs is £3.65.

Most self-employed individuals pay Class 2 and Class 4 NICs via the self-assessment system. Certain self-employed individuals, such as examiners, moderators, invigilators, and ministers of religion, without a salary, do not pay National Insurance through self-assessment but it may be beneficial for them to make voluntary contributions.

National Insurance contributions that relate to employee benefits are known as Class 1A National Insurance contributions. Employers must pay these National Insurance contributions on most work-related benefits provided to employees, such as a company mobile phone or other non-cash perks.

Class 1A National Insurance also applies to certain termination payments. For example, employers may need to pay Class 1A National Insurance contributions on payments exceeding £30,000 made when an employee’s employment ends, such as redundancy or other termination awards. However, this only applies where Class 1 National Insurance has not already been charged on those amounts.

Timing of payment depends on the nature of the liability. For benefits in kind, Class 1A National Insurance is generally payable annually, with payment due by 22 July following the end of the tax year (or 19 July if paying by post). The payment of Class 1A National Insurance on termination awards is dealt with through PAYE at the time the payment is made.

Late payment can result in interest and penalties, so ensuring timely reporting and payment is important.

National Insurance credits can help qualifying applicants to fill contribution gaps in their National Insurance record. This can help taxpayers increase their number of qualifying National Insurance years, which may increase the number of benefits they are entitled to, such as the State Pension.

This could happen if someone was:

• employed but had low earnings
• unemployed and were not claiming benefits
• getting National Insurance credits for less than a full tax year
• self-employed but did not pay contributions because of small profits
• living or working outside the UK.

National Insurance credits are available in certain situations where people are not working and therefore, not paying National Insurance contributions. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.

Depending on the circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these as well as other benefits such as Jobseeker’s Allowance.

Taxpayers may also be able to pay voluntary Class 2 or Class 3 National Insurance contributions to protect their entitlement to the State Pension (and in some cases other benefits) if they meet the eligibility requirements. You can only pay voluntary National Insurance contributions to fill gaps for the previous six tax years. The deadline to make payment is 5 April each year. For example, you have until 5 April 2031 to pay voluntary contributions to make up a gap for the 2024-25 tax year.

It is recommended to check your National Insurance record as this can affect your future entitlement to the State Pension and other benefits.

By using the online service, you can see what National Insurance contributions you have paid up to the start of the current tax year, along with any National Insurance credits you have received. The record also highlights whether there are gaps in your contribution history. This will highlight tax years that do not count as qualifying years for State Pension purposes. These gaps can arise for a variety of reasons, such as periods of low earnings, time spent working abroad or career breaks.

The service also shows whether you are eligible to make voluntary National Insurance contributions to fill any missing years and how much this would cost. Importantly, it allows you to see how your State Pension forecast could change if you decide to make those additional contributions, helping you decide whether paying voluntarily contributions would be beneficial.

Employees with a second job, third job or more may be able to defer or delay paying Class 1 National Insurance on their additional employment. This deferment can be requested when Class 1 National Insurance contributions are being paid to more than one employer.

If you have 2 jobs, over the tax year you’ll need to earn:

• £967 or more per week from one job over the tax year.
• £242 or more per week in your second job

If you have more than 2 jobs, over the tax year you’ll need to earn:

• £1,209 or more per week from 2 of those jobs
• £242 or more per week in your other jobs

This deferral could result in NIC deductions at a reduced rate of 2% on your weekly earnings between £242 and £967 in one of your jobs, instead of the standard rate of 8%.

If you are allowed to defer, HMRC will inform you which employer is your main one for full Class 1 National Insurance contributions and which employers you can pay at the reduced 2% rate, sending those employers a certificate of deferment. HMRC does not share information about your other jobs with your employers.

HMRC will check if you have paid enough National Insurance at the end of the tax year and will write to you if you owe anything.

Claiming Child Benefit can provide an important benefit by granting National Insurance credits.

If you claim Child Benefit and your child is under 12, you will automatically receive National Insurance credits. This in turn will protect your contribution record during periods of home responsibility.

The child benefit rates for the only or eldest child in a family is currently a weekly amount of £26.05 and the weekly rate for all other children is £17.25. Child Benefit is usually paid every 4 weeks. There is no limit to how many children parents can claim for.

These credits are important because they count towards your State Pension, ensuring that there are no gaps in your National Insurance record. This is particularly valuable if you are not working or if you are not earning enough to pay National Insurance contributions, as it helps build your entitlement to a State Pension.

However, if you do not need the National Insurance credits yourself, your family may still be able to benefit. In such cases, your husband, wife, or partner can apply to transfer the credits to themselves. Alternatively, if another family member is providing care for your child, they can apply for Specified Adult Childcare credits to ensure they also receive the National Insurance credits. This system allows families to protect their State Pension entitlements, even if one parent or caregiver is not earning an income.

The High Income Child Benefit Charge (HICBC) currently applies to taxpayers whose income exceeds £60,000 in a tax year and who are in receipt of Child Benefit. The HICBC is charged at the rate of 1% of the full Child Benefit award for each £200 of income between £60,000 and £80,000. For taxpayers with income above £80,000 the amount of the charge will equal the amount of Child Benefit received.

Taxpayers can choose whether to continue receiving Child Benefit and pay the charge or opt out of receiving it to avoid the charge altogether. It is usually beneficial to claim Child Benefit as doing so can safeguard the National Insurance credits and also ensure your child automatically receives a National Insurance number at or just before they turn 16 years old.

If you are self-employed and your profits are above £12,570, you may need to pay Class 4 National Insurance, so it is important to understand how the rates and rules apply to you.

Self-employed individuals are usually required to pay Class 4 National Insurance contributions (NICs) if their annual profits exceed £12,570. These contributions are calculated based on profits and are used to fund various state benefits, including the state pension, unemployment benefits and the National Health Service (NHS).

For the current 2025-26 tax year, Class 4 NIC rates are set at 6% on profits between £12,570 and £50,270, with an additional 2% charged on profits above £50,270.

Certain groups are exempt from paying Class 4 NICs, including:

• Individuals under 16 at the start of the tax year.
• Individuals over State Pension age at the start of the tax year. If someone reaches State Pension age during the tax year, they remain liable for Class 4 NICs for the entire tax year.
• Trustees and guardians of incapacitated individuals are exempt from paying Class 4 NICs on that income.

The Class 4 NIC rate is lower than the corresponding rate for employees, who pay 8% on the same income levels. Both employees and the self-employed contribute 2% on income above the higher rate threshold.

The majority of individuals pay Class 4 National Insurance via self-assessment.

Did you know a missing Home Responsibilities Protection (HRP) record could reduce your State Pension, but you may still have time to put it right.

Home Responsibilities Protection (HRP) was a scheme designed to help individuals, mainly those with caring responsibilities, to build entitlement to the basic State Pension by reducing the number of qualifying years required. HRP applied between 6 April 1978 and 5 April 2010, after which it was replaced by National Insurance (NI) credits.

Although most eligible individuals received HRP automatically during that period, some cases were missed. It’s still possible to apply for HRP retrospectively if it’s missing from your NI record. This is particularly relevant for women at or near State Pension age, especially those who took extended time off work to raise children. A missing HRP record could affect your State Pension entitlement, although not always.

Those affected should check their NI records for gaps and could potentially increase their State Pension at no cost. If a claim is successful, HMRC will update the NI record, and the DWP will recalculate the State Pension amount. This could lead to an increase in the State pension, though in some cases, it may remain unchanged.

Currently, HRP applications are taking over 3 months to process. For the most recent processing times and to check the status of an existing claim you can visit the official HMRC guidance page at www.gov.uk/guidance/check-when-you-can-expect-a-reply-from-hmrc

Working or claiming benefits in the UK? You may need to apply for a National Insurance number first. If you do not already have one, your NI number is essential for tracking tax, National Insurance contributions and accessing certain government services. While most UK residents receive their number at age 16, newcomers or those starting work later in life may need to apply. It takes around four weeks to process after proving your identity, but you can still start work or claim some benefits while you wait.

According to HMRC guidance, you can apply for a National Insurance number if you:

• live in the UK,
• have the legal right to work in the UK, and
• are working, looking for work, or have a job offer.

You can still start work without an NI number, as long as you can prove your right to work in the UK. Similarly, you can apply for benefits or a student loan without an NI number, though you may be asked to provide one later if required.

Most teenagers living in the UK receive a letter shortly before their 16th birthday confirming their NI number. This letter is important and should be kept safe. Your NI number is unique and stays the same for life, even if your name, address or nationality changes. If you lose your NI number, you can find it on official documents like payslips, P60s or via your personal tax account.

Employers must act now to meet the deadline for paying Class 1A NICs for 2024–25 to avoid HMRC penalties. These contributions are due by 19 July 2025 if paying by post, or by 22 July 2025 for electronic payments. Class 1A NICs apply to most taxable benefits given to employees and directors, including company cars and private medical cover. Employers should ensure payments are correctly referenced using their Accounts Office reference number and clearly mark the relevant tax year. Importantly, July payments always relate to the previous tax year, even if made in the new tax year.

Class 1A NICs are payable by employers on the value of most taxable benefits offered to employees and directors, such as company cars and private medical insurance. They also apply to any portion of termination payments exceeding £30,000, provided Class 1 NICs have not already been deducted.

To ensure payments are correctly allocated, employers should use their Accounts Office reference number as the payment reference and clearly indicate the relevant tax year and month. Note that Class 1A NICs paid in July always relate to the previous tax year.

These contributions typically apply to benefits provided to company directors, employees, individuals in controlling positions, and their family or household members.

Employers must pay Class 1A NICs for 2024–25 benefits by 19 July (post) or 22 July (electronic). These apply to perks like company cars and private health cover—late payment risks penalties from HMRC.

Class 1A NICs are payable by employers on the value of most taxable benefits offered to employees and directors, including company cars and private medical insurance. They are also due on any portion of termination payments exceeding £30,000, provided that Class 1 NICs have not already been applied.

To ensure the payment is correctly allocated, employers should use their Accounts Office reference number as the payment reference and clearly indicate the relevant tax year and month. It is important to note that Class 1A NICs paid in July always relate to the previous tax year.

There are three key dates employers must remember for the 2024–25 Class 1A NICs. Forms P11D and P11D(b) must be submitted by 6 July 2025. Postal cheque payments must reach HMRC by 19 July 2025, and electronic payments must clear into HMRC’s bank account by 22 July 2025.

These contributions generally apply to benefits provided to company directors, employees, individuals in controlling positions, and their family or household members.