Understanding National Insurance: Why Do We Pay It?
National Insurance (NI) is a fundamental part of the UK taxation system. Despite its ubiquity, many taxpayers don’t fully understand why they pay National Insurance. This blog post aims to shed some light on the importance of NI contributions and how they benefit individuals and society as a whole.
What Is National Insurance?
According to HMRC, National Insurance is a tax system in the UK that funds certain state benefits, including the State Pension and the National Health Service (NHS). It is deducted directly from your earnings if you’re an employee or paid through self-assessment if you’re self-employed.
Who Pays National Insurance?
- Employees aged 16 or over and earning more than £184 a week.
- Self-employed people making a profit of £6,515 or more a year.
Why Do We Pay National Insurance?
Paying National Insurance is crucial for several reasons:
1. Funding State Benefits
Your National Insurance contributions go towards funding several state benefits. These include the State Pension, unemployment benefits, maternity allowance and bereavement benefits. In 2024, the government spent £95 billion on state pensions alone, demonstrating the vital role of NI in supporting retirees (source).
2. Access to the NHS
National Insurance contributions also help fund the NHS. This ensures that everyone in the UK has access to healthcare services, regardless of their personal circumstances. In fact, in 2025, NI contributions accounted for around 20% of the NHS budget (source).
3. Eligibility for Certain Benefits
Without regular National Insurance contributions, you may be ineligible for certain benefits. For example, you need to have paid NI for a specific number of years to be eligible for the full State Pension.
How Much National Insurance Should You Pay?
The amount of National Insurance you pay depends on your earnings and employment status. In 2024/2025, the rates were:
- 12% of your earnings between £184 and £967 a week if you’re employed.
- 2% of your earnings above £967 a week if you’re employed.
- A flat rate of £3.05 a week plus 9% of your profits between £6,515 and £50,270 a year if you’re self-employed.
- 2% of your profits above £50,270 a year if you’re self-employed.
Conclusion
National Insurance is a vital part of the UK taxation system. It funds important state benefits and ensures access to healthcare services for all. While it might seem like an additional financial burden, the benefits it provides for individuals and society as a whole are invaluable.
For more information on National Insurance, visit the official HMRC website.
