UK finance jargon - in plain English
A tax on your earnings that funds the NHS, state pension, and other benefits.
National Insurance (NI) is a separate tax from income tax, collected through PAYE on your payslip. As an employee in 2026/27, you pay 8% on earnings between £12,570 and £50,270, and 2% on anything above that. Your employer also pays their own NI contributions on top of your wages. NI contributions count toward your State Pension entitlement, so the years you contribute matter for retirement. You need 35 qualifying years for the full new State Pension.
You earn £35,000. After subtracting the £12,570 threshold, £22,430 is subject to NI at 8%, which works out at around £1,794 for the year. That comes out of your pay before you see it, on top of income tax.
NI rates and thresholds are set by the government and can change. The figures above are for 2026/27 Class 1 employee contributions. Self-employed people pay different rates (Class 4).
People think NI is the same as income tax. They are separate deductions with separate purposes. NI directly funds your State Pension record, so gaps in contributions can affect what you receive in retirement.