Part 5: National insurance
contributions
In general everyone in Britain has to pay national insurance contributions if they are:
16 or over; and
employed with earnings above a minimum level; or
self-employed
Contributions paid may provide benefits when sick, unemployed or having a baby. Contributions also pay for retirement pensions and widows' benefits.
Classes of contributions
Class 1 contributions are paid by employees and their employers when earnings reach a lower earnings limit. The contributions are calculated on gross pay and are collected through the PAYE income tax arrangement. They are earnings-related and are calculated on all earnings up to an upper earnings limit.
Further information: Leaflet NI40.
There are special provisions to enable contributors with more than one job to avoid paying excess contributions. Further information: Leaflet NP28.
Class 2 contributions are paid by self-employed people. Payment is usually made by direct debit of a bank or Giro account or by stamping a contribu- tion card. Further information: Leaflet NI41.
Class 2 contributions may be excused if earnings from self-employment are expected to be less than a specified level in any tax year. Further information: Leaflet NI27A.
Class 3 contributions are voluntary and can be paid to enable a person to qualify for certain benefits-but only if Class 1 or Class 2 contributions paid or credited are insufficient. Further information: Leaflet NI42.
Class 4 contributions are paid by self-employed people if earnings are over a specified level in any tax year. They are payable on demand to the Inland Revenue. Further information: Leaflet NP18.
A person who is self-employed and works for an employer may be liable for Class 1, Class 2 and Class 4 contributions.
Special contribution arrangements
Under the New Pension Scheme the right of married women and most widows to have reduced contribution liability (ie to pay reduced-rate Class 1 contributions when employed and not to pay Class 2 contributions when self-employed) is being phased out. The last date on which a woman could choose reduced contribution liability was 11 May 1977. Further information: Leaflet NI1 (Married women), NI51 (Widows) and NP31 (New pensions for women).
There are special contribution arrangements for people in certain employ-
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