How are my national insurance contributions calculated?

The amount of national insurance contributions is calculated on the amount of gross pay you receive. This may include some expenses and benefits.

There six classes of contributions, but, for national insurance purposes, the following three classes are of interest to employees:

• Class 1 – paid by people who work as employed earners
• Class 2 – paid by people who are self employed
• Class 3 – voluntary contributions paid by people who wish to protect their entitlement to a state pension

Your employer has to pay national insurance contributions as well.

The precise calculation of national insurance contributions is done through contribution tables supplied to employers by the Inland Revenue. The amount payable will be based on gross earnings between specified lower and upper limits.

These limits change from time to time and are announced by the Chancellor in the annual budget statement. For 2008/2009, employees pay no NI on earnings under £105 a week and then 11% on earnings up to £770. People earning over £770 a week also pay 1% on their earnings over £770.

If you'd like to get a picture of how much tax and national insurance you're likely to pay on your salary, try our online tax calculator.