I have always thought that National Insurance (NI) is a strange tax compared to PAYE because:
- For normal employees it isn’t cumulative its based on their earnings in a month or week (although Driectors can opt for Cumulative)
- It only applies between the ages of 16 and retirement
- Its applied at different rates to the Self Employed and there are 4 classes of NI
But the thing that seems totally bizarre to me is that for each job you have you get new NI limits, so if you had a variety of part time jobs you might not pay any National Insurance because your earnings were below the threshold in them all.
This also applys if you are Director, you get a new cumulative limit with each employer.
The current main Class 1 rates are 12% for employees and 13.8% for employers
If you’re employed you pay Class 1 National Insurance contributions. The rates are:
- if you earn more than £146 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £146 and £817
- if you earn more than £817 a week, you also pay 2 per cent of all your earnings over £817
Apart from having multiple jobs or changing jobs here are a few ways that you can save NI:
- Salary Sacrifice https://stevejbicknell.com/2011/10/22/salary-sacrifice-could-save-45-8-in-tax-and-ni-how-does-it-work/
- Special NI Holiday Schemes https://stevejbicknell.com/2011/10/15/holiday-pay-without-any-national-insurance-to-pay/
- Regional Employer NI Holiday – save up to £50,000 https://stevejbicknell.com/2011/10/08/reduce-your-ni-bill-by-50000/
- Benefits in Kind – for example Gym membership or Assets placed at the employees disposal – Tax and Class 1A NI is payable but the employee doesn’t pay NI – basically any of th brown boxes on the P11D https://stevejbicknell.com/2011/11/07/tax-free-fitness/https://stevejbicknell.com/2012/04/14/directors-loan-vs-private-use-of-company-assets/