National Insurance (NI) is something which most people in the UK have to pay if they’re employed, along with income tax. But many people don’t even know what it is.
Do you know where this hard-earned money of yours goes every month? If not here’s a simple guide.
So what is it?
National Insurance (NI) is a compulsory contribution for people who aged 16 or above who earn over £166 per week. If you’re self-employed, you don’t have to worry about paying Class 1 NI unless you earn over £8,632 a year. Both figures are from the 2019/20 tax year.
By paying National Insurance, you’re automatically eligible for a state pension when you retire. The money you pay also goes into a pot which is used to pay for jobseekers' allowance if you ever need it, as well as maternity cover and bereavement support.
But that doesn’t mean the payments you’ll receive for any of the above will be high. So you should also have your own savings, and try to find an employer offering a private pension.
National Insurance Number
Everybody of working age in the UK is issued a National Insurance number and an NI card which displays a 10-digit code, which is made up of numbers and letters.
If you don’t know where your card is, you can still find the NI number on a P60 end of year summary slip, a payslip, or letters from the government about tax, pensions or benefits.
But if you still can’t find it or if you simply don’t have one, you can apply to the gov.uk website to have another one sent out.
What else is a National Insurance Number used for?
If you’re a student or are planning on applying to university, the Student Loans Company will use your NI number to arrange your loan and calculate and collect the repayments after you leave.
Electoral Registration Officers will also use your NI number to keep track of where you’re living in the UK, which is also important for your credit score as it will be negatively affected if you’re not on the electoral roll.
Banks will also use your NI number if you choose to open an ISA. And finally if you ever need to claim benefits, your NI number will be used to apply and keep track of payments.