National Insurance

How much does it raise?

How does it work?

National Insurance is charged on earnings, like income tax, but on a different base and at different thresholds, which is why the two never line up neatly. It is not charged on pensions, savings interest, dividends or rental income.

There are three payers. The employee pays a percentage of earnings between two thresholds and a much lower percentage above the upper limit. The employer pays a flat percentage on everything above a lower threshold, with no upper limit. The self-employed pay their own rate on profits.

Employer National Insurance is the part most people never see, and it is the largest of the three. Economists generally find that most of it is borne by workers in the long run through lower wages rather than by shareholders, because employers treat it as part of the cost of hiring. The OBR assumes most of it passes through to wages within a few years.

The rates for 2026-27:

Rates: GOV.UK, National Insurance rates and categories. Checked by hand 22 September 2026.

Unlike income tax, National Insurance buys something specific: qualifying years towards the state pension. Thirty-five qualifying years currently gets the full new state pension. That link is real but weak, since you can gain qualifying years through credits without paying anything.

Someone earning £35,000

The employee sees £1,786 on their payslip. The other £4,500 never appears on it, but it is money the employer is spending to employ them.

Work out your take-home pay after income tax and National Insurance

How has it changed?

How it got here, and why each change was made:

• 1911Lloyd George introduces National Insurance as genuine contributory insurance: workers, employers and the state each pay into funds for sickness and unemployment.
• 1948The Beveridge system makes it universal and ties it to the new state pension and the NHS.
• 1975Flat-rate stamps are replaced by earnings-related contributions, which makes it function much more like an income tax.
• 2003A 1% rise across all rates is introduced explicitly to fund the NHS, the first time the link is made openly.
• 2022A 1.25 percentage point Health and Social Care Levy is added, then reversed within months.
• 2024The employee main rate is cut from 12% to 10% and then to 8%, the largest cuts in its history.
• 2025The employer rate rises from 13.8% to 15% and the threshold falls from £9,100 to £5,000, raising around £25bn. The OBR expects most of it to reach workers as lower pay rises.

Where does the money go?

The National Insurance Fund, and the NHS. This one is genuinely earmarked, though less tightly than the name suggests. Most contributions go into the National Insurance Fund, which pays the state pension and contributory benefits and is legally separate from general taxation. A defined slice is allocated to the NHS instead. But the Fund is not invested: today’s contributions pay today’s pensions, and if it ran short the Treasury would top it up from general taxation. It is a ring-fence, not a pot of savings.

Because it is not earmarked, the only honest way to show what it pays for is by proportion. If national insurance receipts of £200.8bn were spent in the same proportions as all public spending in 2025-26, they would break down like this. It is an illustration of scale, not a statement about where those particular pounds went.

See for every £100 of tax for the full picture.

Does it change what people do?

The self-employed pay a lower rate than employees, and the gap has been a long-running argument: it encourages people to be classified as self-employed for tax reasons rather than because of how they actually work. An attempt to narrow it in 2017 was abandoned within a week after objections that it broke a manifesto commitment.

When a tax rise stops raising money looks at the cases where the effect has been large enough to move the revenue.

How does that compare with other countries?

In 2024 the UK raised 6.1% of GDP this way: seventh of the 11 countries compared here.

Most European countries raise far more through social security contributions than the UK does, and correspondingly less through income tax. Comparing income tax rates alone across countries is therefore misleading; the two have to be added together.

What are the arguments?

Both columns are set out as their strongest case, not as a preferred answer and a strawman. See how this site handles contested questions.