National Insurance is a system of taxation in the United Kingdom that is used to fund various state benefits. It is paid by individuals who are employed or self-employed, as well as by employers. In this journal article, we will discuss the basics of National Insurance, including how it works, who pays it, and what it funds.
What Is National Insurance?
National Insurance is a system of taxation that is used to fund various state benefits. It is paid by individuals who are in employment or self-employment and by employers. The system was established in 1911 and has undergone various changes since then.
The National Insurance contributions that individuals and employers pay go towards funding the state benefits system. Some of the benefits that are funded by National Insurance contributions include the State Pension, Jobseeker’s Allowance, and the National Health Service (NHS).
How Does National Insurance Work?
National Insurance contributions are deducted from an individual’s pay before they receive it. The amount of National Insurance that an individual pays is based on how much they earn, with different rates applying to different income levels. Employers also pay National Insurance contributions on behalf of their employees.
The National Insurance system in the UK is divided into various classes, each of which corresponds to different types of individuals and payments. For example, Class 1 National Insurance contributions are paid by employees and employers, while Class 2 contributions are paid by self-employed individuals.
Who Pays National Insurance?
Most individuals who are in employment in the UK are required to pay National Insurance contributions. This includes employees who earn over a certain amount, as well as self-employed individuals. Employers also have to pay National Insurance contributions on behalf of their employees.
There are various exemptions and special cases when it comes to National Insurance contributions. For example, some individuals who are on a low income may be exempt from paying National Insurance, while others who are self-employed may be required to pay different rates depending on their earnings.
What Does National Insurance Fund?
National Insurance contributions are used to fund a variety of state benefits and services. These include:
Benefit/Service |
Description |
State Pension |
A regular payment that individuals receive from the government when they reach retirement age |
Jobseeker’s Allowance |
A benefit that individuals can claim if they are unemployed and looking for work |
National Health Service (NHS) |
The UK’s publicly-funded healthcare system |
Maternity Allowance |
A benefit that pregnant women can claim if they are self-employed or not eligible for Statutory Maternity Pay |
Disability Living Allowance |
A benefit that individuals with a disability can claim to help with extra costs |
FAQs
What Happens if I Don’t Pay National Insurance?
If you don’t pay National Insurance contributions when you are required to, you may not be eligible to receive certain state benefits, including the State Pension. You may also be fined or face legal action if you deliberately avoid paying National Insurance.
How Much National Insurance Do I Have to Pay?
The amount of National Insurance that you have to pay depends on how much you earn. There are different rates for different levels of income, and some individuals may be exempt from paying National Insurance altogether.
Can I Claim Back National Insurance?
You cannot claim back National Insurance contributions that you have paid unless you have overpaid due to an error. If you think that you have overpaid National Insurance, you can contact HM Revenue and Customs (HMRC) to correct the error.
Do I Have to Pay National Insurance If I Am Self-Employed?
If you are self-employed, you are required to pay Class 2 and Class 4 National Insurance contributions. The amount that you have to pay depends on your earnings.
Can I Opt Out of Paying National Insurance?
No, you cannot opt out of paying National Insurance if you are required to do so. However, there are some exemptions and special cases where individuals may not have to pay National Insurance.
Conclusion
National Insurance is an important system of taxation in the UK that goes towards funding state benefits and services. Most individuals who are in employment or self-employment are required to pay National Insurance contributions, while employers also have to make contributions on behalf of their employees. Understanding how National Insurance works and what it funds is important for all UK residents.
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