National Insurance is a tax on earnings that pays for certain state benefits. There are different 'Classes' of National Insurance depending on your employment status and how much you earn.

The type of National Insurance you pay depends on whether you are employed or self-employed.

For Employed Individuals:

Class 1: This is paid by employees earning above a certain threshold. It is deducted automatically from your salary by your employer through the PAYE system.

For Self-Employed Individuals:

Class 2: A flat-rate weekly contribution. Paying this builds your entitlement to the State Pension. For the 2024/25 tax year, it is treated as paid if your profits are over the Small Profits Threshold, with no cash actually needing to be paid.
Class 4: This is based on your annual profits. You pay a percentage on profits between a lower and upper threshold. It does not count towards state benefits.

Other Classes:

Class 3: These are voluntary contributions. You can choose to pay them if you have gaps in your NI record and want to top up your entitlement to the State Pension.

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