15 Sep Why Do You Pay National Insurance In The UK?
If you are over 16 years and earning in the United Kingdom, you are required to make national insurance contributions (NIC). These contributions are taxed on self-employed profits and earnings. Unlike tax, these contributions are not charged from other income sources, including properties, pension, and savings. Contributors are also eligible to enjoy some social security benefits, such as the state pension. In this article, we explore why do you pay national insurance in the UK?
What Income Sources are Subject to the National Insurance Contributions?
NICs are deducted from the incomes of anyone above the age of 16. The taxable incomes are from the profits and salaries from employment. Job-related expenses may be deducted, and rules for what is being deducted are much stricter for employees than for those running their businesses. Private pension deductions cannot be subject to NIC contributions because NIC does not interfere with pension savings.
National insurance contributions were payments introduced by the UK Government in 1911. The primary focus of the government was to have a safety-net for employers and employees who could experience hard economic times. Out of their earnings, employees are expected to make their contributions to the scheme. Therefore, individuals making these payments can benefit from the NI contributions. For example, anyone under this scheme who loses their job can claim these funds to cater to their medical bills.
Over the years, the NIC system has changed, and now the NI funds are used in various ways. They can pay for unemployed benefits, the NHS, disability and sickness allowances, and the state pension. The funds raised by members can only be used in these areas. That means contributors cannot request funds employing police officers, building schools or other investments. However, the UK government may borrow funds from the National Insurance fund for other development projects.
How Much Do I Contribute?
If you work for an organization, you make a payment of 11% on any amount you earn between $110 and $844 each week. Anyone earning over $844 per week has to pay an additional 1%. Individuals who are self-employed make contributions at a flat-rate of $2.40 weekly. However, there is an additional 8% on profits ranging between $5,715 and $43,875 annually. Employees in the United Kingdom also contribute into the scheme 12.8% of an employee salary.
Investing your money in NI can be a wise move to make. When you are experiencing job challenges, you can get some funds and cater to your medical bills and other issues. Consider enrolling in this scheme and enjoy its surmountable benefits if you are living in the UK.