National Insurance
Most UK citizens will receive a state pension and some may receive incapacity benefit, bereavement allowance, widowed parent's allowance or contribution based job-seekers allowance. The government will cover most of these costs with National Insurance Contributions (NICs) that are automatically deducted from your salary if it exceeds a set limit.
NICs are payable by anyone that is in employment, earning above a certain amount and between the ages of 16 - 60* for women, or between 16 - 65 for men.
Rates for National Insurance
During the tax year of 2008 - 2009, the rates are;
Employed Tax Payers - If you earn over £105 per week, you will pay 11% of your salary, this is called class 1 NICs. If you earn above £770 per week, you will pay a further 1% on anything above the £770 threshold. Being a member of any employer's contracted out pension scheme will result in the amount payable being lower.
Self-Employed Tax Payers - You may have to pay to different classes of NICs; Class 2 which is a flat rate of £2.30 per week and Class 4 which is 8% of any taxable annual profits between £5,435 and £40,040, plus a further 1% of any excess profits over £40,040. Both classes of NICs are payable unless you expect to earn less than £4,825 per year, in which case you can apply for a Small Earning Exception using form CF10 to eliminate the need for paying Class 2 NICs.
Your National Insurance Number (NI Number)
This is the unique reference number that everybody in the UK must have before starting work or claiming benefits. The number will relate to your personal 'tax account' where records of all tax payments are stored.
It is usual for all 15 year olds, whose parents are registered for Child Benefit, to recieve a NI Number and NI Number Card automatically before their 16th birthday. If this is not the case, you must apply for a NI Number by telephoning the JobCentre Plus NI Allocation Service Hotline on 0845 600 0643.
*By 2020, the retirement age will have gradually increased to 65 years.
THE DIRECT ADVICE TAX GUIDE
Taxes for Individuals
Income Tax - National Insurance - Stamp Duty - Inheritance Tax
Taxes for Businesses