National Insurance

In the UK a system administered by Her Majesty's Revenue and Customs (HMRC) called National Insurance pays for state benefits like the National Health Service and State Pension.

National Insurance Contributions

National Insurance Contributions (NICS) are taken directly from employees' wages using the Pay As You Earn (PAYE) system, along with income tax and any student loan repayments due. If you're self-employed, you pay your NICS when you complete your self-assessment tax return. There are a number of NICS categories and these are classed by number:

Class 1

Class 1 national insurance contributions count towards contribution-based Jobseeker’s Allowance, Incapacity Benefit, contributory Employment and Support Allowance, Bereavement Benefits, State Retirement Pension and Maternity Allowance.

Class 2

Class 2 contributions count towards the same benefits as Class 1, except that Class 2 will not usually count towards contribution-based Jobseeker’s Allowance.

Class 3

Class 3 count towards bereavement benefits and State Pension.

Class 4

Class 4 contributions do not count towards any benefits. However, you still have to pay these if you are self-employed and have profits over a certain level.

How do NICS contributions affect benefits?

State Pension

There are a number of qualifying years' NICS you need to get a full state pension. The number depends on when you reach your State Pension age.

If you reached state pension age before 6 April 2010, you normally needed 44 qualifying years if you are a man, or 39 qualifying years if you are a woman. If you reach state pension age on or after 6 April 2010 but before 6 April 2016, you need 30 qualifying years. If you reach State Pension age on or after 6 April 2016, you normally need 35 qualifying years.

Jobseeker's Allowance

Your entitlement to contribution-based Jobseeker's Allowance (JSA), depends on the National Insurance contributions you have paid over the last two complete tax years before the benefit year you make your claim in.

A benefit year starts in January (on the first Sunday of that month) and ends a year later. If you want advice on whether you meet the contribution conditions for Jobseeker’s Allowance, you should consult an experienced adviser, for example, at a Citizens Advice Bureau.

Last updated: 02 June 2015