National Insurance threshold: What are the National Insurance rates for 2020/21?

The threshold at which taxpayers start to pay National Insurance contributions has risen this year. If you earn less than this amount you will pay no National Insurance contributions. The increase in the threshold means around 31 million people have received a tax cut of £104 a year. Self-employed workers will save about £78 on their bill too.

What is National Insurance?

You pay National Insurance contributions to qualify for certain benefits and the State Pension.

You pay mandatory National Insurance if you are more than 16 years old and are either:
• an employee earning above £183 a week
• self-employed and making a profit of £6,475 or more a year
If you suddenly stop earning less than the above, you may be able to pay voluntary contributions to avoid gaps in your National Insurance contributions.

There are different types of National Insurance, known as classes. Which one you pay depends on your employment status and how much you earn.

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What is the National Insurance threshold?

National Insurance is calculated on your earnings before tax or pension deductions above an ‘earnings threshold’.

For 2020/21, the Class 1 National Insurance threshold is £9,500 a year.

If you earn more, you’ll pay 12 percent of your earnings between £9,500 and £50,000. You’ll pay two percent on any earnings above £50,000.

Last year it was lower, at £8,632 a year.

What are the national Insurance classes?

There are five types of National Insurance payments.

Class 1 is paid by employees earning more than £183 a week and under State Pension age, and they’re automatically deducted by your employer.

Class 1A or 1B is paid directly by employers on their employee’s expenses or benefits.

Class 2 is paid by self-employed people earning more than £6,475 a year.

Class 3 is paid by those wishing to make voluntary contributions.

Class 4 is paid by self-employed people earning profits of £9,501 or more a year

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What is the National insurance rates for 2020/21?

Class 1 rate

If you pay Class 1 National Insurance contributions and earn between £9,500 and £50,000 a year, you will pay 12 percent of your earnings towards National Insurance.

If you pay Class 1 National Insurance and you earn over £50,000 a year, your rate this year is two percent.

You’ll pay less if:

you’re a married woman or widow with a valid ‘certificate of election’
you’re deferring National Insurance because you’ve got more than one job

Class 2 and 4 rates

If you are self-employed and earn between £6,475 and £9,500, you will pay £3.05 a week.

If you are self-employed and earn between £9,500-£50,000 you will pay 9 percent plus £3.05 per week.

If you are self-employed and earn more than £50,000, you will pay 2 percent plus £3.05 a week.

Those unemployed or exempt from National Insurance payments who push to pay class 3 voluntary contributions will pay £15.30 per week.

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