As we start the new tax year on 6th April 2021, there are new National Insurance Contributions to be applied to employees, employers, the self employed and taxpayers making voluntary contributions.
As you know, self employed people pay both Class 2 and Class 4 National Insurance Contributions when they reach HMRC’s thresholds.
Class 2 NICs 2021-2022 tax year
Class 2 contributions for 2021-22 must be paid on earnings over the small profits’ threshold, which is now £6,515.
The rate of Class 2 NICs is £3.05 per week.
If you are a UK citizen it is worth considering paying voluntary Class 2 national insurance contributions if you decide to live in another country.
Class 4 NICs 2021/2022 tax year
You need to pay Class 4 NICs on your profits that fall between the lower profits’ limits and upper profits limit. For 2021-22, this is between £9,568 and £50, 270.
The rate of Class 4 NICs is 9% of you profits between the lower and upper limits. On any profits over the upper profits’ threshold, you need to pay an extra 2% Voluntary Contributions.
You can choose to pay Class 3 voluntary NICs in order to keep your record straight. In 2021-22 tax year, this is set at a rate of £15.40 per week.
Employees and national insurance
As an employee, you pay primary Class 1 NICs on your salary.
You’re not involved in Class 1 NICs until you reach the lower earnings threshold. In 2021-22 this is £120 per week, £520 per month or £6,240 per year. Between the lower earnings limit and the primary threshold, you pay zero rate NICS. So, you’re registered with a qualifying year of state pension, but you haven’t had to pay anything.
From the primary threshold, you start paying Class 1 National Insurance Contributions.
In 2021-22, this is £184 per week, £797 per month, or £9,568 per year. From this threshold to the upper earning limit, you pay NICS at a rate of 12%.
The upper earning limit for 2021-22 is £967 per week, £4,189 per month or £50,270 per year. Once you go over this income, you pay an extra 2% NICs.
Employers national insurance contributions
Employers pay secondary rate Class 1 NICs. This is 13.8 % on everything over the secondary threshold.
The thresholds for 2021-22 are:
- Secondary threshold applies to employees aged 21+, not under 25 and not apprentices. Rate of £170 per week. Threshold of £967 per week.
- Higher secondary threshold is for employees under the age of 21 and apprentices under 25. You must pay these on earnings over the threshold of £967 per week.
For Class 1A and 1B contributions, the rate for 2021-22 tax year stays the same at 13.8%.
Remember you need to check you’re paying the correct NIC’s, or your state pension and access to benefits won’t be right. HMRC has a dedicated number for National Insurance inquiries to answer any questions and you can call them on 0300 200 3500.
