NI Classes Explained

Key facts

Class 1 is split into employee (primary) and employer (secondary) contributions.
Only Classes 1, 2, and 3 build entitlement to the State Pension and contributory benefits.
Class 4 NI on self-employment profits does not provide any benefit entitlement.
Classes 1A and 1B are paid only by employers — on benefits in kind and PAYE Settlement Agreements respectively.

The Six NI Classes and Who Pays Each One

The UK National Insurance system is divided into six classes. Which class you pay depends on whether you are employed, self-employed, or an employer — and in some cases whether you are paying voluntarily.^[1]

Class	Paid By	Rate (2025/26)	Builds Pension?
Class 1 (primary)	Employees	8% (PT–UEL), 2% above UEL	Yes
Class 1 (secondary)	Employers	15% above Secondary Threshold	N/A
Class 1A	Employers	15% on benefits in kind	N/A
Class 1B	Employers	15% on PSA items	N/A
Class 2	Self-employed	£3.45/week	Yes
Class 3	Voluntary	£17.75/week	Yes
Class 4	Self-employed	6% (£12,570–£50,270), 2% above	No

Class 1: Employees and Employers

Class 1 is the most common type of NI and applies to employed earners. It has two components:^[2]

Primary (Employee) Contributions

Employees pay Class 1 primary NI on their earnings:

0% on earnings up to the Primary Threshold (£242 per week / £12,570 per year)
8% on earnings between the Primary Threshold and the Upper Earnings Limit (£967 per week / £50,270 per year)
2% on all earnings above the Upper Earnings Limit

These contributions are deducted by your employer through PAYE and sent to HMRC along with your Income Tax.

Secondary (Employer) Contributions

Employers pay Class 1 secondary NI on their employees’ earnings. From April 2025:

15% on all earnings above the Secondary Threshold (£5,000 per year / £96 per week)
There is no upper limit — employer NI continues at 15% on all earnings above the threshold

Note: The employer’s Secondary Threshold dropped from £9,100 to £5,000 per year in April 2025, and the rate increased from 13.8% to 15%. This represents a significant cost increase for employers.

NI Category Letters

Employees are assigned an NI category letter that determines the rates applied. The most common are:^[2]

Letter	Who It Applies To
A	Standard employees (most common)
B	Married women / widows with reduced rate election (rare, being phased out)
C	Employees over State Pension age
H	Apprentices under 25
M	Employees under 21
Z	Employees under 21 who have deferred NI

Class 1A: Benefits in Kind

Class 1A NI is paid by employers on the taxable value of benefits in kind they provide to employees. Common benefits subject to Class 1A include:^[1]

Company cars and fuel benefit
Private medical insurance
Interest-free or low-interest loans above £10,000
Living accommodation (unless job-related)

The rate is 15% from April 2025 (previously 13.8%). Class 1A is due by 22 July following the end of the tax year (or 19 July if paying by post).

Class 1B: PAYE Settlement Agreements

Class 1B applies to employers who have agreed a PAYE Settlement Agreement (PSA) with HMRC. A PSA covers minor, irregular, or impracticable benefits and expenses — things like staff entertainment, small gifts, or relocation expenses.^[4]

The employer pays Class 1B NI at 15% (from April 2025) on the grossed-up value of the items included in the PSA. This is due by 22 October following the end of the tax year.

Class 2: Self-Employed (Flat Rate)

Class 2 NI is a flat-rate weekly contribution paid by self-employed people:^[3]

£3.45 per week (2025/26) — approximately £179 per year
Only compulsory if profits exceed the Small Profits Threshold (£6,845)
Can be paid voluntarily if profits are below the threshold
Builds entitlement to the State Pension, Maternity Allowance, and ESA

Tip: Class 2 is the cheapest way to get a qualifying year for State Pension purposes. At £3.45 per week (£179/year), it costs a fraction of voluntary Class 3 (£17.75 per week / £923/year).

Class 3: Voluntary Contributions

Class 3 is for people who want to fill gaps in their NI record but are not self-employed (or whose self-employment profits are too low for Class 2 to be mandatory). The rate is £17.75 per week (2025/26).^[1]

You might pay Class 3 if you:

Took time out of work (e.g. caring responsibilities, travel, sabbatical)
Lived abroad and did not pay NI
Had earnings below the Lower Earnings Limit

Class 4: Self-Employed (Profits-Based)

Class 4 NI is charged on self-employment profits and is collected through Self Assessment:^[3]

6% on profits between £12,570 and £50,270
2% on profits above £50,270
No benefit entitlement — effectively a profits tax
Included in your Self Assessment tax bill and payments on account

Example: A sole trader with £35,000 profit pays Class 4 NI of £1,345.80 (6% on £22,430 between £12,570 and £35,000), plus Class 2 of approximately £179 — a total NI bill of around £1,525.

Which Classes Build Benefit Entitlement?

Benefit	Class 1	Class 2	Class 3	Class 4
State Pension	Yes	Yes	Yes	No
Contributory JSA	Yes	No	No	No
Contributory ESA	Yes	Yes	No	No
Maternity Allowance	Yes	Yes	No	No
Bereavement benefits	Yes	Yes	Yes	No

Frequently Asked Questions

Which NI class do I pay?

If you are an employee, you pay Class 1. If you are self-employed, you pay Class 2 and Class 4. If you are an employer, you pay secondary Class 1 on your employees’ earnings and Class 1A on any benefits in kind you provide.

Does Class 4 NI count towards my State Pension?

No. Class 4 NI does not build any entitlement to the State Pension or contributory benefits. Only Class 1 (employee), Class 2, and voluntary Class 3 contributions count towards your NI qualifying years.

What is Class 1A National Insurance?

Class 1A is paid by employers on the value of benefits in kind they provide to employees — for example company cars, private medical insurance, or interest-free loans above £10,000. The rate is 15% from April 2025. Employees do not pay Class 1A.

Can I pay voluntary NI to fill gaps in my record?

Yes. Class 3 voluntary contributions cost £17.75 per week (2025/26) and can fill gaps in your NI record to boost your State Pension. If you are self-employed with low profits, voluntary Class 2 at £3.45 per week is a cheaper alternative.

What is Class 1B National Insurance?

Class 1B is paid by employers who have a PAYE Settlement Agreement (PSA) with HMRC. A PSA lets employers pay tax and NI on minor, irregular, or impracticable benefits on behalf of employees. Class 1B NI is charged at 15% (from April 2025) on the grossed-up value of the items in the PSA.

Sources

National Insurance: introduction — GOV.UK
National Insurance rates and categories — GOV.UK
Self-employed National Insurance rates — GOV.UK
PAYE Settlement Agreements — GOV.UK