1. National Insurance

2. What is National Insurance? The money collected through National Insurance (NI) funds the payment of contributory benefits (such as State Pension, Employment Support Allowance and Bereavement benefits). Before 1975, paying NI was known as ‘paying your stamp’, because people had to buy stamps to put on a National Insurance stamp card. In 1944, PAYE (Pay As You Earn) was introduced. Under PAYE, employers deduct (take off) income tax from employees’ wages and pay it directly to the government. After 1975, National Insurance began to be deducted the same way, so those working for an employer no longer had to hold a National Insurance stamp card.

3. Who pays National Insurance? You pay National Insurance Contributions (NICs) if you are aged 16 and over and working in a job (i.e. you are an employee) or working for yourself (i.e. you are self-employed). You start paying NICs once your earnings reach a certain level (£149 per week in 2013-2014). You stop paying NICs when you reach State Retirement age.

4. What is a NINO? Your National Insurance number (NINO) is unique and only applies to you. It makes sure that there is an accurate record of how much you have paid in National Insurance Contributions (NICs). The format of your National Insurance number (NINO) is always two letters followed by six digits and one letter, e.g. QQ 12 34 56 A. You can’t use your National Insurance number as proof of your identity.

5. How do you get a National Insurance Number? If you are under 16, you live in the UK and your parents or carers receive Child Benefit for you, you will be registered automatically. Your National Insurance number (NINO) will be sent to you just before your 16th birthday. If you do not have a National Insurance number, you must apply for one as soon as you start work or claim benefits. You may need to go to an interview so that you can prove your identity. If you lose your NI number card you can apply for a replacement. You are only allowed one replacement. If you have forgotten your NINO, HMRC can write to let you know what it is.

6. Some state benefits depend on your NICs Whether you are entitled to the following benefits, and / or how much you get will depend on your National Insurance contributions (NICs) Contribution-based Jobseeker's Allowance Contribution-based Employment and Support Allowance (ESA) State Pension Widowed Parent's Allowance Bereavement Allowance Bereavement Payment

7. How much will I pay? If you are an employee, earning less than £149 per week (the earnings threshold) you will not pay National Insurance contributions (NICs). Between £149-£797 per week you pay 12% of the gross amount you earn as your NICs. On everything over £797 a week (the upper earnings limit) you pay NICs of 2%. For example: –on an income of £200 per week an employee pays £6.12 in NICs –on an income of £900 per week NI would be £79.82 In addition your employer pays a contribution of 13.8% when you earn more than £148 a week. Self-employed people pay NICs differently. They pay a flat rate of £2.70 a week, and then 9% of any annual profits over £7,755 (up to £41,450 and 2% on any profits over that amount).

8. How much NICs do we pay? Bianca earns £150 a week. What NICs is she liable for? How much would you (realistically) like to earn when you leave school? When you’ve decided, calculate how much your NICs will be.