Who pays National Insurance?

Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man may be liable to pay National Insurance contributions. You pay National Insurance contributions to build up your entitlement to certain social security benefits, including the State Pension. The type and level of NIC you pay depends on how much you earn and whether you're employed or self employed.

If you:

• work for an employer (employed earner) you will pay Class 1 National Insurance Contributions
• work for yourself (self employed), you will pay Class 2 and Class 4 National Insurance Contributions

You stop paying NICs when you reach State Pension age.

Employers must also pay National Insurance contributions for each person they employ who is aged 16 or over and whose earnings are above the set limits.

National Insurance Rates

The following amounts apply for the 2008-2009 tax year if you're employed:

• if you earn above £105 a week (the 'earnings threshold') and up to £770 per week you pay 11 per cent of this amount as 'Class 1' NICs
• you also pay one per cent of earnings above £770 a week as Class 1 NICs
• you will pay a lower amount as an employee if you are a member of your employer's contracted out pension scheme

Your National Insurance number

Your National Insurance number (NI number) is your own personal account number. The number ensures that the National Insurance contributions and the tax you pay are properly recorded on your account. It also acts as a reference number for the whole social security system.

Who uses your NI number?

The only people you should ever give your NI number to are:

• HM Revenue & Customs (HMRC)
• your employer
• Jobcentre Plus, if you claim Jobseeker's Allowance
• your local council, if you claim Housing Benefit

Entitlement to many benefits depends on your National Insurance contribution record so it's very important not to give your number to anyone else. You will also be required to provide your NI number if you open an Individual Savings Account (ISA).

Benefits that depend on NIC contributions

Your entitlement to the following benefits and/or the amount you can get will depend on your (or in some cases your spouse or civil partner's) NIC contributions:

• Contribution based Jobseeker's Allowance (Class 1 NICs only)
• Incapacity Benefit (if you can't work for long periods due to illness or injury)
• State Pension
• additional State Pension (Class 1 NICs only)
• Widowed Parents' Allowance
• Bereavement Allowance
• Bereavement Payment