Q. What are the National Insurance bands? How have they changed?
Q. What are the National Insurance rates? How have they changed? |
SOURCES
HMRC. National Insurance contributions (tax year 1999 to 2000, to tax year 2019 to 2020). Published 28 March 2014 Last updated 5 April 2019 https://www.gov.uk/government/statistics/main-features-of-national-insurance-contribution |
National Insurance tax bands
National Insurance Tax Bands |
Thresholds for Tax Year 2019-20 (Annual Pay Equivalent) |
Tax Rate |
No NIC (and do not get benefits of paying) on pay up to |
£6,136 |
0% |
No NIC (but get benefits) on pay between |
£6,136 - £8,632 |
0% |
Primary NIC Rate on pay between |
£8,632 - £50,024 |
12% |
Upper Earnings Limit (UEL): Reduced NIC Rate on pay above |
£50,024 + |
2% |
There are many variations to National Insurance but this section covers the broadly standard rates and bands that will apply to the majority of employees.
Similarly to income tax, National Insurance Contributions (NICs) are taxed on pay above a certain threshold and according to 'tax bands'. However, on pay above a certain threshold, the NIC rate reduces rather than increases. Currently the 'primary' or standard NIC rate is 12% and then it drops to 2% on pay above £50,024 per year, although it is calculated on a weekly basis. |
There are 3 key thresholds when it comes to National Insurance.
The first is the 'Lower Earnings Limit' (LEL) which is the point at which employees stand to get the Benefits from Paying NIC without actually paying anything. The second is the 'Primary Threshold' (PT) which is when employees start paying NIC on pay at the standard rate of 12%. The third is the 'Upper Earnings Limit' (UEL) where the NIC rate drops to 2% on pay above this threshold. |
National Insurance |
Weekly Thresholds for Tax Year 2019-20 |
Monthly Thresholds for Tax Year 2019-20 |
Equivalent Annual Thresholds |
Lower Earning Limit (LEL) |
£118 |
£512 |
Approx. £6,136 - 6,144 |
Primary Threshold (PT) |
£166 |
£719 |
Approx. £8,628 - 8,632 |
Upper Earings Limit (UEL) |
£962 |
£4,167 |
Approx. £50,004 - £50,024 |
The 'Upper Earnings Limit' threshold has increased steadily with a marked change between 2008 and 2010. This increase would mean people earning at this level would end up paying more NIC (12% rather than 2%).
Since this dataset's baseline in 2000, all 3 thresholds have increased more than the inflation rate. In particular the 'Primary Threshold' has seen an overall 120% increase compared with approximately 40% inflation, which means less NIC for the lower earners. |
National Insurance tax rates
In terms of the National Insurance tax rates, they have stayed at the same levels since 2011-12 (12% and 2%) .
Before 2011-12, they were 11% and 1%, so the amount people were paying towards NIC was slightly less. Earlier still - before 2003-04, the primary NIC rate was only 10%, so even lower than the current tax rate. These increased rates will contribute to why National Insurance has increased as an overall income for Government Funding quite significantly. While this section is only about Employee's NIC, there is also Employer's NIC which companies pay directly to the government. |