National Insurance In The UK| All You Need to Know

National Insurance In The UK| All You Need to Know

National Insurance In The UK

National insurance in the UK is basically, the major component of the United Kingdom welfare state which can be traced to 1905 when the Royal Commission made recommendations as to how to alleviate the distress caused by sickness, unemployment, and old age.

Sickness benefits for manual and nonmanual workers as well as unemployment benefits were introduced by the National Insurance Act. 1911.

The benefit was secured by contributions made by employees, employers, and the state. The foundation of the present-day social security was laid by Beveridge’s reports on social insurance and Allied service in 1942.

The Department of Health and Social Security has the responsibility for its administration. It now provides about sixty different cash benefits, including unemployment benefits, mortality benefits, Industrial disablement benefits, and many more

Contributory benefit and contribution

The scheme is open for employed and self-employed persons over the age of sixteen years. They ensure the national insurance contribution and are entitled to benefits from the scheme, provided that they have paid the minimum number of national insurance contributions, as provided by the regulation governing the particular benefits.

Types of contibutions

There exist 4 types of contributions which are as follows.

Class 1 contribution:

This is a particular contribution paid by every employed person earning above a stipulated minimum income. The contribution is a fixed percentage of an employee’s gross salary deduced on a pay-as-earn [PAYEE] basis.

A lower rate of contribution applies to employees in contracted-out occupational pension schemes, while employees over retirement age do not contribute at all.

Those who ensure strict compliance with this class are qualified for all the contributory benefits.

Class 2 contribution:

This class entails the weekly rate of contribution paid by all self-employed persons whose earnings are above the stipulated minimum. They are restricted to certain benefits e.g. unemployment benefits, earning-related state pensions, and death grants.

Class 3 contribution:

This contribution is voluntary. It is intended to make up for the deficit in class one and two contributions. Contributions are paid at a flat weekly rate.

They do not count for unemployment, sickness, invalidity benefits, maternity allowances, or the earnings-related part of the state pension scheme.

Class 4 contribution:

Where a self-employed person earns profit beyond a stated level, he is subject to pay an earning-related contribution in addition to his class 2 contribution.

This additional contribution is simply an extra tax that does not earn him any contributory benefits.

Retirement pension:

In the United Kingdom, every citizen is entitled to a pension at the age of 60 both male and female, provided he or she has completed the qualifying number of years as a contributor to the national insurance scheme {NIS}.

Unemployment benefits:

This benefit is specifically available for unemployed persons who might have registered at the local unemployment office or job center.

He or she must have been a class 1 contributor with at least 50 contributions to his or her credit in the year ending 5 April before the commencement of the year in which the period of his unemployment began.

After three days of unemployment, benefits can be paid but payments exceed one year. Unemployment benefits are taxable by virtue of the Finance Act 1981.

Death grant and widows allowances

Death of a contributor or the wife, husband, or child of a contributor qualifies for payments of death grants; which is a small lump sum depending on the age of the contributor at death.

This widow’s allowance is paid weekly for 26 weeks, to widows under 60. This benefit will depend on the contributor having paid sufficient national insurance contributions before death.

Statutory sick pay, sickness, and invalidity benefits:

Absenteeism from work for at least 4 days because of illness is entitled to be paid a statutory sick pay [SSP] and sickness benefit. this entitlement is available to employees paying class contributions.

An employer pays SSP to his employee for the first eight weeks of illness during a tax year based on average earnings in the eight weeks preceding the illness.

The employer then recoups related sums from the Department of Health and Social Security.

Self-employed as well as employed people who remain ill after receiving SSP for eight weeks have available to them a flat weekly rate of sickness benefit provided they paid a minimum number of class 1 or 2 contributions.

Sickness benefit is replaced by invalid benefits after the first 28 weeks of illness, invalidity benefit is paid slightly at a higher rate.

Maternity benefit:

This comes in two parts. The first is a lump sum grant the payments of which are based either on the mother or the father’s contribution, any time between 14 weeks before the birth and three months afterward.

The second is the weekly allowance payable to women who have themselves paid sufficient contributions. the allowance is paid for 18 weeks commencing at least 11 weeks before the expected date of delivery.

Noncontributory Benefits

These benefits are available in certain circumstances to both the noon contributors and the contributors to the national insurance scheme. In this regard, the claimant must prove that he or she is in dire need of financial help.

Supplementary benefit:

This means-tested benefit. A person to receive it should be over 16 and who is not in full-time employment or education. His income must be below a minimum level fixed by parliaments.

The claimant’s requirements, his or her existing income, and savings will determine the number of weekly payments to be made to him or her. Claimants without a job for a long time may be paid benefits at a higher rate.

Family Income supplements:

This is another means-tested benefit. This benefit is weekly allowances payable to anyone with dependent children and whose gross earnings from full-time employment are less than the minimum laid down by the parliaments.

Those who receive supplementary benefits or family income supplements are automatically entitled to other non-cash benefit which includes free dental care and prescription.

Attendance allowance:

This is also not a means-tested benefit. This particular allowance is paid to severely handicapped people who require a great deal of help support or supervision from others.

Housing Benefits:

Housing benefits are not part of the social security system. It is administered by the local authority as a way of assisting households with their rent and rates.

The financial circumstances and extent to which the accommodation is shared with other adults by the claimants will determine the amount of benefit payable.

Disablement benefits:

This benefit is paid under the industrial injuries scheme to people who have become disabled or unable to work following an industrial accident or disease.

Befit will become payable after 90 days have elapsed since the day of occurrence of the accident or the day on which the claimants became disabled by the disease. The national insurance in the UK ensures that all the benefits entitled to the affected person are given to him as when due.

The extent of the disablement determines the number of benefits.

Mortality allowance:

This benefit is paid to people who are really incapacitated that they cannot even walk out of the door. It is available to people between the ages of 5 and 75. Generally, no claim can be made after age 65.


We have earlier stated that National insurance is basically, the major component in the United Kingdom welfare state which could be traced to 1905 when the Royal Commission made recommendations as to how to alleviate the distress caused by sickness, unemployment, and old age. National Insurance in the UK all you need to know is contained here in this article.

There exist different types of National Insurance or classes of NI

The type each individual pays depends on his or her employment status and how much he or she earned.

Thanks, the comment section is available for your contribution and opinion.

Leave a Reply

Your email address will not be published. Required fields are marked *


Enjoy this blog? Please spread the word :)