National Insurance was introduced in 1948 to build up your entitlement to certain social security benefits including the state benefit.
The type and level of NiC’s depends on how much you earn and whether you are employed or self-employed.
You stop paying National Insurance when you reach pension age, 65 for men and 60 for women.
If you are employed, the following rates apply:
• if you earn above £100 a week (earning threshold) and up to 670 per week you pay 11% of this amount as class 1 NIC’s
• you pay 1% of earnings above £670 per week.
If you are self-employed you pay two types of National Insurance:
• Class 2, at a flat rate of £2.20 a week.
• Class 4, as 8% of your taxable profits between £5225 and £34840 and 1% on any taxable profit over that amount.
There are certain benefits that depend on National Insurance Contributions:
•contribution based Jobseeker’s Allowance ( Class 1 NIC’s only)
•Incapacity Benefit( if you can’t work for long periods due to illness or injury)
•Additional state pension( Class1 NIC’s only)
•Widowed Parent’s Allowance