National Insurance contributions for 2020/21
The starting point for paying National Insurance is to increase to £9,500 for 2020/21 for employees and for Class 4 contributions payable by the self-employed. This is in line with a Government commitment to increase the starting threshold to £12,500 – the level of the personal allowance for tax purposes.
Employees and Employers
Class 1 National Insurance contributions are payable on an employee’s earnings by the employee (primary contributions) and by the employer (secondary contributions). The rates and thresholds applying for 2020/21 are shown in the table below.
| Class 1 | |
|---|---|
| Weekly lower earnings limit (LEL) | £120 per week £520 per month £6,240 per year |
| Primary threshold (PT) | £183 per week £792 per month £9,500 per year |
| Secondary threshold (ST) | £169 per week £732 per month £9,500 per year |
| Upper earnings limit (UEL) | £962 per week £4,167 per month £50,000 per year |
| Upper secondary threshold for under 21s | £962 per week £4,167 per month £50,000 per year |
| Apprentice upper secondary rate (AUST) | £962 per week £4,167 per month £50,000 per year |
| Employee’s primary rate (payable on earnings between the PT and UEL) | 12% |
| Employee’s additional rate (payable on earnings above the UEL) | 2% |
| Secondary rate (payable on earnings above the relevant secondary threshold) | 13.8% |
| Reduced rate for certain married women (on earnings between the PT and UEL) | 5.85% |
For 2020/21, the primary and secondary thresholds are no longer aligned. This means that the point at which employer contributions for employees over the age 21 kicks in is £169 per week (£732 per month), while employee contributions are not payable until earnings reach £183 per week (£792 per month). On earnings between these limits, employer contributions are payable but not employee contributions.
The rate of Class 1A contributions (payable on benefits in kind) and Class 1B contributions (payable on items included in a PAYE settlement agreement) remains at 13.8%.
The self employed
The self-employed pay flat-rate Class 2 contributions and also Class 4 contributions on their profits.
For 2020/21, Class 2 contributions increase by 5p per week to £3.05 per week. Contributions are only mandatory if profits exceed the small profits threshold. This is set at £6,475 for 2020/21. However, they can be paid voluntarily where profits are less than this level.
As with employees, the starting point at which Class 4 contributions become payable on the profits of the self-employed – the lower profits limit – increases to £9,500 for 2020/21. Contributions are payable at the main rate of 9% on profits between this level and the upper profits limit, which remains at £50,000 for 2020/21. Above this, contributions are payable at the rate of 2%.
Voluntary contributions
Voluntary (Class 3) contributions can be paid to make up a shortfall in your contributions record and preserve your entitlement to the state pension. Class 3 contributions rise to £15.30 per week for 2020/21.
Check your contributions record
Speak to us about whether you need to pay additional contributions to ensure that you will qualify for the full state pension when you reach state pension age. You can obtain a pension forecast online.