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National Insurance

Rates and allowances - National Insurance contributions

National Insurance - rates and allowances 
£ per week (unless specified)2007-082008-092009-10
Lower earnings limit, primary Class 1 £87£90£95
Upper earnings limit, primary Class 1 £670£770£844
Upper accruals pointN/AN/A£770
Primary threshold £100£105£110
Secondary threshold £100£105£110
Employees’ primary Class 1 rate between primary threshold and upper earnings limit 11%11%11%
Employees’ primary Class 1 rate above upper earnings limit 1%1%1%
Employees’ contracted-out rebate1.60%1.60%1.60%
Married women’s reduced rate between primary threshold and upper earnings limit4.85%4.85%4.85%
Married women’s rate above upper earnings limit1%1%1%
Employers’ secondary Class 1 rate above secondary threshold12.80%12.80%12.80%
Employers’ contracted-out rebate, salary-related schemes3.70%3.70%3.70%
Employers’ contracted-out rebate, money-purchase schemes1.40%1.40%1.40%
Class 2 rate£2.20£2.30£2.40
Class 2 small earnings exception£4,635 pa£4,825 pa£5,075 pa
Special Class 2 rate for share fishermen£2.85£2.95£3.05
Special Class 2 rate for volunteer development workers£4.35£4.50£4.75
Class 3 rate£7.80£8.10£12.05
Class 4 lower profits limit£5,225 pa£5, 435 pa£5, 715 pa
Class 4 upper profits limit£34,840 pa£40, 040 pa£43, 875 pa
Class 4 rate from  lower profits limit to upper profits limit8%8%8%
Class 4 rate above upper profits limit1%1%1%
Class 1A NICs payable in July 2009 for benefits provided in the 2007-08 tax year are due at 12.8%

Which contributions pay for which benefits

Class 1

Class 1 national insurance contributions count towards contribution-based Jobseeker’s Allowance, Incapacity Benefit, Bereavement Benefits, Retirement Pension and Maternity Allowance.

Class 2

Class 2 contributions count towards the same benefits as Class 1, but Class 2 will not always count towards contribution-based Jobseeker’s Allowance.

Class 3

Class 3 (voluntary contributions) count towards bereavement benefits and Retirement Pension.

Class 4

Class 4 contributions do not count towards any benefits. 
However, you still have to pay these if you are self-employed and have profits over a certain level.

Contribution-based Jobseeker’s Allowance

Whether you are entitled to contribution-based Jobseeker's Allowance (JSA), depends on the National Insurance contributions you have paid over the last two complete tax years before the benefit year you make your claim in.

A benefit year starts in January (on the first Sunday of that month) and ends a year later.

Incapacity Benefit

The first contribution condition for Incapacity Benefit is that you must have actually paid Class 1 or 2 national insurance contributions in one of the last three tax years before you claim. However, you may be able to satisfy this condition with contributions paid in any tax year, if you haven’t been able to pay contributions recently, for example, because you were getting Carer’s Allowance or Incapacity Benefit, or if you were getting Working Tax Credit with a disability element before you became incapable of work.

The second condition is that you must either have paid or been credited with contributions for the last two tax years before you claim. However, credited contributions will not always count towards this condition.

Widowed Parent’s Allowance and Bereavement Allowance

The first contribution condition for Widowed Parent’s Allowance and Bereavement Allowance is that your husband, wife or civil partner must have actually paid Class 1, 2 or 3 contributions in any tax year before they died. You do not have to satisfy this condition if they were getting long-term Incapacity Benefit in the year they died.

The second contribution condition is that your late husband, wife or civil partner must either have paid or been credited with contributions for most of their working life - this is most of the years between 16 and their death. If your husband, wife or civil partner had home responsibilities protection, the number of years they needed to have contributions or credits is reduced.

If your husband, wife or civil partner did not have contributions or credits for the right number of years, you can get a reduced rate of Widowed Parent’s Allowance or Bereavement Allowance, as long as they had contributions or credits for at least 25 per cent of the necessary years.

Bereavement Payment

There is only one contribution condition for a Bereavement Payment. Your husband, wife or civil partner who has died must have actually paid, in any one tax year, Class 1, 2 or 3 contributions. Contributions paid in different years can be added up in certain circumstances - for example, if your husband, wife or civil partner had only just become liable to pay contributions when they died.

Pensions Act 2007

The Government introduced the Pensions Bill, which has now become the Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008.

See links page to calculate your State Pension Age

Additionally the State Pension age will increase from 65 to 68 between 2024 and 2046.The Act also provides for the basic State Pension to still be based on the number of qualifying years you have built up through National Insurance contributions (whether paid, treated as paid or credited).You can pay voluntary class-3 National Insurance contributions to make up the qualifying years needed to get a higher or full basic State Pension. However, the number of qualifying years you need to qualify for a full basic State Pension has been reduced to 30 years for people reaching State Pension age on or after 6 April 2010, so you may want to consider carefully whether you need to pay voluntary class-3 National Insurance contributions.

The Act has made the following changes for people reaching State Pension age on or after 6 April 2010:Only 30 qualifying years will be needed for a full basic State Pension. (A qualifying year is a year that counts towards your basic State Pension because enough National Insurance contributions were paid, treated as paid or credited to you in that year).
  • From 2010 Home Responsibilities Protection will be replaced by a new system of credits for parents, foster carers and people caring for 20 hours a week or more for the severely disabled which will count towards both basic State Pension and State Second Pension.

  • National Insurance credits will be awarded for periods you were covered by Home Responsibilities Protection before 2010. (Home Responsibilities Protection reduces the number of years you need to work to get a full State Pension if you are not earning and are caring for someone, for example an elderly relative or your children.) Having credits for these years means that they count towards your basic State Pension.

  • People with very few qualifying years will get at least some basic State Pension.

  • How contributions pay for benefits

    To get a benefit which depends on national insurance contributions, you must usually have paid contributions or had NI credits which add up to a minimum amount in a certain period. Most contribution-based benefits have two contribution conditions. The conditions are different depending on which benefit you are claiming.

    Retirement Pension

    The contribution conditions for state Retirement Pension are very complicated. You may be able to use your husband, wife’s, or civil partner's contribution record instead of or as well as your own if this would give you a better pension.

    The first contribution condition for Retirement Pension usually requires actual Class 1, 2 or 3 contributions to be paid in any one year. You may satisfy this condition through your own contribution record, or your spouse or civil partner's. If you have recently been getting long-term Incapacity Benefit, you may not have to meet this condition.

    The second contribution condition is that you must have paid or been credited with contributions for most of your working life. For a woman, this is most of the years between 16 and 60, and for a man, most of the years between 16 and 65. If you have had home responsibilities protection, the number of years you have to have contributions or credits is reduced.(see under Help for parents and carers through home responsibilities protection). You may be able to combine your contribution record with your husband's, wife's or civil partner's contribution record if:

    • you are widowed
    • you are the surviving civil partner of a partner who has died
    • you are divorced
    • your civil partnership has been dissolved.

    If you don’t have contributions or credits for the required number of years, you can get a reduced rate of retirement pension, as long as you have contributions or credits for at least 25 per cent of the required years.

    The number of years you need to have paid contributions in order to qualify for a basic State Retirement Pension is reduced to 30 years if you are a man or woman due to reach retirement age on or after 6 April 2010.

     2007/082008/092009/10
    Basic Retirement Pension
    Single person£87.30£90.70£95.25
    (£4,540pa)(£4,716pa)(£4,953pa)
    Total married pension£139.60£145.05£152.30
    (£7,259pa)(£7,542pa)(£7,920pa)
    Statutory sick pay (SSP) 
    Average weekly earnings £95 or over (2007/08: £87 2008/09:£90):£72.55pw£75.40pw£79.15pw
    Statutory maternity pay (SMP)
    First 6 weeks90% of av wkly pay90% of av wkly pay90% of av wkly pay
    Next 33 weeks Max. £112.75. Max. £117.18. Max. £123.06.
    Min. - 90% of av wkly pay
    Minimum Rate £78.30pw£81.00pw£85.50pw
    (£87x90%)(£90x90%)(£95x90%)
    Statutory paternity pay (SPP)1wk or 2wks paid. You can't take odd days off and if you take 2wks they must be taken together.
    Statutory adoption pay (SAP) 39 weeks
    Both SAP & SPPMax. £112.75. Max. £117.18. Max. £123.06.
     Min. - 90% of av wkly pay
    Minimum£78.30pw£81.00pw£85.50pw 
    Child Benefit
    First eligible child£18.10pw£18.80pwFrom Jan 09
    £20.00pw
    Each subsequent child£12.10pw£12.55pw£13.20pw
    Guardian's allowance £12.95pw£13.45pwFrom Apr 09
    £14.10pw
    Jobseekers Allowance (JSA)
    If you're out of work or working less than 16 hours a week on average, you may be able to get Jobseeker's Allowance. You must be: capable of working, available for work, actively seeking work and below state pension age.
    Contribution-based JSA
    You may get contribution-based JSA if you have paid or been credited with class 1 NICs in the relevant tax years. Self employed contributions will not generally qualify you for contribution-based JSA.
    Income-based JSA
    This is based on your income and savings. You may get this if you have not paid enough NICs (or you've only paid contributions for self-employment) and you're on a low income.
    Single person (age 16-24)Under 18 £35.65/£47.95pw£50.95pw
    18-24 £46.85
    Single person (age 25 and over)£59.15pw£60.50pw£64.30pw
    Married couple (both age 18 and over)£92.80pw£94.95pw£100.95pw
    Your payments might be reduced if you receive income from part-time employment. You'll get less if you have savings over £6,000. If you have savings over £16,000 you probably won't qualify. If your partner or civil partner works 24 hours or more a week on average, you can't usually get income-based JSA (contribution-based JSA isn't affected). If they work less than 24 hours, it may affect how much you get.
    Bereavement Benefit
    Lump Sum £2,000£2,000£2,000
    Bereavement allowance (standard)£87.30pw£90.70pw£95.25pw
    Widowed parent's allowance£87.30pw£90.70pw£95.25pw