What is National Insurance and do I have to pay it?
National Insurance is a tax on earnings and profits that funds the NHS and your State Pension. Here's how it works and who has to pay it.
National Insurance (NI) is a tax on earnings and profits that contributes to the NHS, state benefits and your State Pension. Like Income Tax, it's collected by HMRC. But it works differently depending on whether you're employed, self-employed or running a limited company.
Most working adults in the UK pay National Insurance in some form. Understanding how it works means you can structure your income sensibly, keep your NI costs efficient and make sure you're building qualifying years towards your State Pension along the way.
What does National Insurance pay for?
National Insurance contributions fund three main things: the NHS, certain state benefits such as Jobseeker's Allowance and Maternity Allowance, and your State Pension.
That last one affects how you plan for retirement. The State Pension is based on the number of qualifying years you have on your NI record, not on how much NI you've paid.
You need 35 qualifying years for the full new State Pension (currently £241.30 per week) and at least 10 to receive anything at all. A year where you earned £20,000 counts exactly the same as a year where you earned £80,000. Paying more NI doesn't increase what you receive.
It's also worth knowing that NI credits can count as qualifying years without any earnings at all. If you're caring for a child under 12, looking after a sick or disabled person, or claiming certain benefits, you may be building qualifying years without paying any National Insurance.
What are the different classes of National Insurance?
National Insurance comes in different classes depending on how you work and how you earn.
Class 1 is paid by employees and employers on salary, through PAYE
Class 2 is a flat-rate voluntary contribution for the self-employed
Class 3 is voluntary contributions used to fill gaps in your NI record
Class 4 is paid by the self-employed on profits above a certain threshold
If you run a limited company and pay yourself a salary, you pay Class 1 as both employee and employer.
Do I have to pay National Insurance?
Whether you pay National Insurance, and how much, depends on how much you earn and how you work.
There's a Lower Earnings Limit (LEL) of £6,708 for 2026/27. If your earnings are at or above this level but below the Primary Threshold of £12,570, you don't pay any NI at all, but you still build a qualifying year for your State Pension. HMRC records it as a notional zero-rate contribution.
If your earnings fall below the LEL, you don't build a qualifying year automatically. You would need to pay voluntary Class 3 contributions to fill that gap.
If you're employed
The confirmation statement and your annual accounts are two separate filings with separate deadlines. Both are filed with Companies House, but they run on different timetables and serve different purposes.
The confirmation statement covers the accuracy of your company's registered details.
Your annual accounts cover the financial position of the business.
How your accountant helps with your confirmation statement
Filing the confirmation statement is part of the annual compliance work your accountant handles on your behalf. Before submitting, they will check your company's details, make sure everything on record is current and correct, flag anything that needs updating and take care of the filing itself within the deadline.
Like many of the routine compliance tasks that come with running a limited company, it's the kind of thing that is easy to overlook when you're focused on running the business. We keep track of it so it gets done properly and on time, every year, without it landing on your desk.