NI Glossary

Key facts

There are six classes of NI: Class 1, 1A, 1B, 2, 3, and 4.
The Primary Threshold is the point at which employees start paying NI (£242/week in 2025/26).
The Secondary Threshold is the point at which employers start paying NI (£96/week in 2025/26).
A qualifying year requires earnings at or above the Lower Earnings Limit, NI credits, or voluntary contributions.
Your NINO (National Insurance Number) is your unique identifier for the NI system.

About This Glossary

National Insurance has its own vocabulary of thresholds, classes, category letters, and acronyms. This glossary explains each term in plain English, with references to the relevant GOV.UK guidance where applicable.^[1]

A – C

Term	Definition
Additional Rate (NI)	The reduced NI rate applied to earnings above the Upper Earnings Limit (employees) or Upper Profits Limit (self-employed). For employees: 2%. For the self-employed (Class 4): 2%.
Category Letter	A letter code (A, B, C, H, M, V, etc.) assigned to each employee that determines the NI rates applied. Category A is standard; others provide reliefs for specific groups such as apprentices (H), under-21s (M), and veterans (V).^[2]
Class 1 NI	NI contributions paid on employment earnings. Has two components: primary (employee) and secondary (employer). Employee rate is 8% (PT to UEL) and 2% (above UEL). Employer rate is 15% on earnings above the Secondary Threshold.
Class 1A NI	Employer-only NI charged at 15% on the taxable value of most benefits in kind (company cars, private medical insurance, etc.). Reported on P11D and paid by 22 July after the tax year.
Class 1B NI	Employer-only NI charged on items included in a PAYE Settlement Agreement (PSA). A PSA allows employers to pay tax and NI on minor, irregular, or impracticable-to-allocate benefits on behalf of employees. Class 1B is charged at the same rate as Class 1A (15%).
Class 2 NI	A flat-rate weekly NI contribution for the self-employed (£3.50/week in 2025/26). From April 2024, Class 2 is no longer compulsory. Self-employed people with profits above the Small Profits Threshold are treated as having paid. Those below can pay voluntarily.^[1]
Class 3 NI	Voluntary NI contributions (£17.75/week in 2025/26) that anyone can pay to fill gaps in their NI record and protect their State Pension entitlement. Generally available for the past 6 years.
Class 4 NI	NI paid by the self-employed on profits. Main rate: 6% on profits between £12,570 and £50,270. Additional rate: 2% on profits above £50,270. Collected through Self Assessment.
Contracted Out	A historical arrangement (abolished 6 April 2016) where employees in certain workplace pension schemes paid a reduced NI rate. No longer available, but may affect NI records and State Pension calculations for years before 2016.

D – F

Term	Definition
Deferment	An arrangement to defer (postpone) NI contributions, typically used by people with multiple jobs or who are both employed and self-employed. Prevents overpayment of NI across multiple sources. Applied for through HMRC.
Employment Allowance	An annual reduction in an employer’s Class 1 secondary NI liability. Worth up to £10,500 in 2025/26. Available to employers with a previous year NI bill under £100,000 and at least one non-director employee.
EPS (Employer Payment Summary)	An RTI submission sent to HMRC to report reductions to the employer’s PAYE liability: Employment Allowance claims, statutory payment recoveries, CIS deductions, and nil-payment months. Due by the 19th of the following month.
FPS (Full Payment Submission)	The main RTI submission sent to HMRC each payday containing details of gross pay, Income Tax, and NI for each employee. Must be submitted on or before the date of payment.
Freeport	A designated geographic area offering employer NI relief. Qualifying new employees in Freeport tax sites benefit from a 0% employer NI rate on earnings up to £25,000/year (NI categories F, I, S, L).

L – N

Term	Definition
LEL (Lower Earnings Limit)	The minimum weekly earnings required for a week to count on your NI record. Set at £125/week (£6,500/year) in 2025/26. Earnings at or above the LEL but below the Primary Threshold build your NI record without you paying any NI.
Lower Profits Limit	The threshold at which self-employed people start paying Class 4 NI. Set at £12,570/year in 2025/26 (aligned with the Personal Allowance).
NI Credits	Credits added to your NI record for periods when you are not working or earning. Awarded automatically for claiming certain benefits (Child Benefit for children under 12, Jobseeker’s Allowance, Universal Credit, Carer’s Allowance, etc.). Credits count towards qualifying years for the State Pension.^[3]
NI Record	Your personal record of NI contributions and credits held by HMRC. It determines your entitlement to the State Pension and certain benefits. You can check it online through your Personal Tax Account on GOV.UK.
NINO (National Insurance Number)	Your unique NI identifier, in the format AB 12 34 56 C. Issued automatically to UK residents before their 16th birthday or on application. Used by HMRC and DWP to track your NI contributions and benefit entitlements.

P – R

Term	Definition
P11D	The form employers use to report the taxable value of benefits in kind and expenses provided to employees during the tax year. Filed with HMRC by 6 July following the end of the tax year. The accompanying P11D(b) declares the Class 1A NI due.
P45	A form issued by an employer when an employee leaves. It shows the employee’s pay, tax, and NI category up to the leaving date. The new employer uses it to set up the employee on their payroll.
P60	An annual certificate issued to employees by 31 May showing their total pay, Income Tax deducted, and NI contributions for the tax year. Only issued to employees on the payroll on 5 April.
Primary Threshold (PT)	The earnings level at which employees start paying Class 1 NI. Set at £242/week (£1,048/month, £12,570/year) in 2025/26. Aligned with the Income Tax Personal Allowance.^[2]
PSA (PAYE Settlement Agreement)	An arrangement with HMRC allowing an employer to pay Income Tax and Class 1B NI on certain minor or irregular benefits on behalf of employees, rather than reporting them through payroll or P11D.
Qualifying Year	A tax year in which you have enough NI contributions or credits to count towards your State Pension. You need 35 qualifying years for the full new State Pension (£230.25/week in 2025/26) and at least 10 for any pension at all.^[4]
RTI (Real Time Information)	The system through which employers report payroll information to HMRC in real time (each payday) rather than annually. Introduced in April 2013. The two main RTI submissions are FPS and EPS.

S – U

Term	Definition
Secondary Threshold (ST)	The earnings level at which employers start paying Class 1 secondary NI. Set at £96/week (£417/month, £5,000/year) in 2025/26. Significantly reduced from £9,100 in 2024/25.^[2]
Small Profits Threshold (SPT)	The annual profit level below which self-employed people can choose to pay voluntary Class 2 NI. Set at £6,845 in 2025/26. Those above the SPT are treated as having paid Class 2 automatically from April 2024.
State Pension	A regular payment from the government once you reach State Pension age (currently 66, rising to 67 between 2026 and 2028). The full new State Pension is £230.25/week in 2025/26. Your NI record determines how much you receive.
State Pension Age	The age at which you can claim your State Pension. Currently 66 for both men and women. Scheduled to rise to 67 between May 2026 and March 2028, and to 68 at a future date (under review).
UEL (Upper Earnings Limit)	The earnings level above which the employee NI rate drops from 8% to 2%. Set at £967/week (£4,189/month, £50,270/year) in 2025/26. Does not affect employer NI, which has no upper limit.
Upper Profits Limit (UPL)	The equivalent of the UEL for the self-employed. Class 4 NI drops from 6% to 2% on profits above £50,270/year.
Upper Secondary Threshold (UST)	The threshold up to which employers pay 0% NI for certain categories: apprentices under 25 (H), employees under 21 (M), and veterans (V). Set at £50,270/year (same as the UEL).

V – Z

Term	Definition
Voluntary Contributions	NI contributions you choose to pay to fill gaps in your record. Class 2 voluntary contributions (£3.50/week) are available to the self-employed with profits below the Small Profits Threshold. Class 3 voluntary contributions (£17.75/week) are available to anyone. You normally have 6 years to fill a gap.^[1]
Zero-Rate Band	The range of earnings on which 0% NI is charged. For employees, this is the band between the Lower Earnings Limit and the Primary Threshold. Earnings in this band still count towards your NI record.

Frequently Asked Questions

What is the difference between all the NI classes?

Class 1 is paid by employees and employers on earnings. Class 1A is paid by employers on benefits in kind. Class 1B is paid by employers on PAYE Settlement Agreements. Class 2 is for the self-employed (now voluntary). Class 3 is voluntary contributions to fill gaps. Class 4 is paid by the self-employed on profits.

What does the Primary Threshold mean?

The Primary Threshold (£242/week, or £12,570/year in 2025/26) is the earnings level at which employees start paying Class 1 NI. Below this amount, no employee NI is charged. Earnings between the Lower Earnings Limit and the Primary Threshold count towards your NI record without you paying.

What is an NI qualifying year?

A qualifying year is a tax year in which you have sufficient NI contributions or credits to count towards your State Pension entitlement. You need 35 qualifying years for the full new State Pension and a minimum of 10 for any State Pension at all.

What is the Upper Earnings Limit?

The Upper Earnings Limit (UEL) is £967/week (£50,270/year) in 2025/26. Employee NI drops from 8% to 2% on earnings above the UEL. For employers, there is no upper limit — they pay 15% on all earnings above the Secondary Threshold.

Sources

National Insurance: introduction — GOV.UK
National Insurance rates and categories — GOV.UK
National Insurance credits — GOV.UK
State Pension: eligibility — GOV.UK