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why do we pay national insurance contributions

If you have a job, then you pay National Insurance. It is taken out of your salary depending on how much you earn, similar to income tax. But because it isn't called a tax, governments can say they haven't increased income tax even though they've put up National Insurance. Labour is planning to increase how much both employers and employees pay. The Conservatives claim that will damage business and say they will scrap the rise. So what is National Insurance and how does it work? National Insurance payments were introduced in 1911. The idea was to provide a government safety-net for workers who fell on hard times. Employees paid money into the scheme out of their wages. Anyone needing cash for medical treatment, or because they had lost their job, could claim from the fund. What it is used for? The system has changed over the years. NI is supposed to be "ring fenced" - meaning the money raised is only used for these areas and won't be spent on things like building schools or employing police officers.


However, the government can borrow from the National Insurance fund to help pay for other projects. How much do I pay? If you earn more than бе844 per week, there's an extra 1% added on top. A flat rate of бе2. 40 per week,
plus 8% of your profits between бе5,715 and бе43,875 per year. You also pay into the scheme - 12. 8% of an employee's salary. Why are politicians arguing about NI? Labour plans to increase National Insurance contributions by 1% for employees and employers. They claim that is needed to pay for public services during the recession. The Conservatives say that will damage the economy and have the support of several high profile business leaders. Instead they want to find extra cash from cutting "wasteful" spending. The Liberal Democrats are also sceptical about the Conservative plan to freeze NI. Where does National Insurance money go and why do we have to pay it? (Picture: Getty) Unlike many other countries, Britain has a unique welfare system that helps to support those of its people who are in need.


P The average UK citizen financially contributes to the support that the state provides in numerous different ways. So what role does National Insurance play? Who pays it and how long do you pay it for? Where does the cash go? Do you get your contributions back? Well yes you do, in a way. Mostly through a. Putting money away for a rainy day? Well, sort of (Picture: Getty) To qualify for a State Pension, plus certain benefits (like Maternity Allowance and unemployment benefits), you must pay National Insurance. If youre 16 or over and either earn above S157 a week as an employee, or are self-employed and making a profit of S6,025 or more a year, you automatically begin owing this money.


However, you need aPNational Insurance numberPbefore you can start paying contributions. If you earn less than S157 a week (and more than S113),Pyour contributions are treated as having been paid to protect your National Insurance record. So how much do you have to pay? National Insurance comes to 12 per cent of your weekly earnings when you earn between S157 and S866, and two per cent of your weekly earnings above S866. There are four classes of National Insurance depending on how much you earn and whether there are gaps in your payment record. Class 1 is when your employer pays the National Insurance from your wages automatically, before paying you, after you start earning S157 or more per week. In Class 1A or 1B, employers pay the contributions directly on their employees expenses or benefits. Then inPClass 2, self-employed peoplePwho earn less than S6,025 a year are classified as having to payPS2. 85 a week out of their income while being invited to make larger contributions.


Class 3 covers those self-employed people making these voluntary contributions, and you can find out whether this path is suitable for you by Finally,PClass 4 are the self-employed people earning profits over S8,164 a year. In Class 4, you pay 9 per cent on profits between S8,164 and S45,000 and two per centPon profits over S45,000 and you must do this via Self-Assessment. If you need to tell HMRC you are now self-employed you can use. You can also apply forPNational Insurance credits, which fill in gaps in your payments when youre not working or ill for some reason. You canP Pon GOV. UK. National Insurance contributions help to fund the NHS, the State Pension, unemployment benefits and sickness and disability allowances. MORE: MORE:

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