Sarah Bradford explains the National Insurance contributions landscape for 2020/21.
National Insurance contributions (NICs) are payable by employees, employers and by the self-employed. However, not all classes of NICs are equal. Some classes provide the means to earn entitlement to the state pension and contributory benefits, whereas others are more akin to a tax.
The rates and thresholds also vary across the classes.
Employees and employers
Class 1 NICs are payable by employees (primary contributions) and employers (secondary contributions) on earnings from an employment. Class 1 NICs, unlike tax, are worked out separately for each earnings period (which is generally the pay interval) without taking account of previous earnings in the tax year. The exception to this is company directors, who are deemed to have an annual earnings period.