The National Insurance in the UK is what is also known as Social Security. Workers over 16 residing in the UK must contribute to national insurance to access all benefits.
However, EU workers temporarily posted to UK may not have the same obligations as UK residents.
National Insurance in the UK
The Department for Work and Pensions (DWP) oversees social security in the UK, having replaced the Department of Social Security in 2001. It has the highest spending among all government departments and is responsible for delivering the State Pension along with various benefits for working-age individuals.
In addition to the above-mentioned department, His Majesty’s Revenue and Customs (HMRC) administers tax credit and Child Benefit. In fact, the UK refers to Social Security as the National Insurance Scheme, and every citizen is entitled to their own National Insurance Number (NIN).
Employees working in the United Kingdom who have their own NIN may pay different types of contributions, known as classes, based on their employment conditions. As a basic principle, all the citizens above 16 should pay National Insurance Contributions if they:
- Are employees earning more than £242 a week; or
- self-employed workers earning more than £6,725.
National Insurance Classes and Categories in the UK
The UK divides National Insurance into classes based on employment status and earnings. Employees pay taxes based on the Class/es they belong to, which are:
- Class 1: all the employees earning more than £242 a week and under State Pension age,
- Class 1A or 1B: employers pay these on the employees’ expenses and benefits
- Class 2: self-employed workers earning more than £6.725 a year
- Class 3: paid when there are contribution gaps in the worker’s NIN, which may arise from low earnings, previous unemployment, or periods spent living or working outside the UK.
- Class 4: self-employed workers earning more than £11.909 a year.
To assess how much employees or employers need to contribute, they use the National Insurance Categories, which are the following letters: A, B, C, F, H, I, J, L, M, S, V, Z. Most workers belong to Category letter A.
HM Revenue and Customs (HMRC) calculates and publishes the thresholds and tax rates for both employees and employers every year.
How to apply for a NIN in the UK
To be eligible to apply for a NIN in the UK, the applicant must:
- Live in the UK,
- Have the right to work in the UK,
- Have an offer to work in the UK.
However, if applicants fall under the EU Settlement Scheme, they do not need to apply for it.
To start the online application, the applicant must have either one of these documents:
- A passport,
- A biometric residence permit,
- An EU Country, Norway, Liechtenstein or Switzerland national identity card.
Should applicants not be able to forward the online application, they can send the application by post. Nevertheless, the processing times will be larger.
Once applicants complete the procedure, the competent authorities will review it (the procedure might take up to 4 weeks), and if they verify the identity, they will issue the National Insurance Number.
Foreign Workers in the UK
Workers coming to the UK from an EU Country will usually pay for only one social contribution scheme, thanks to the social agreements with those Countries.
In this regards, the employer or self-employed worker must apply for the A1Certificate at their own National Social Security Institute (EU Regulation 883/04).
Said certificate can be requested for employees working temporarily in the UK for up to 2 years.
Although the legal basis of the Eu Regulation is not valid anymore in the UK, it still holds its validity thanks to the PSSC (Protocol on Social Security Regulation), which entered into force with the conclusion of the EU-UK TCA.
On the contrary, workers coming from Iceland, Liechtenstein or Norway must ensure that the EEA-EFTA Separation Agreement covers them so they only need to pay social contributions in one country.
If the worker is not covered by any social security agreement, they must pay National Insurance.
However, the worker can avoid paying National Insurance for the first 52 week of working in UK if he meets the following requirements:
- The worker usually works abroad and is employed by a non-UK employer,
- The employer temporarily employs the worker in the UK,
- The employer mainly employs the worker abroad,
- HMRC evaluates the worker as not ordinarily resident or employed in the UK.