Introduction to UK National Insurance Number
In the UK, National Insurance Number (NINO) is a vital piece of record that plays a significant role in the taxation and social security systems. Most UK residents over 16 years old can apply. It is used for employment, paying tax, managing national insurance contributions, state pension, benefits, and etc.
UK has different classes of National Insurance (NI). The class of NI you should pay depends on your personal status and how much you earned.
- Component of National Insurance Number
A National Insurance Number, or NINO for short, is a unique set of alphanumeric codes that serve as an identifier for an individual. The NI number has a total of 9 characters and consists of the first 2 letters, the middle 6 digits, and the last letter, the last letter is A, B, C, or D, for example, QQ123456A.
It is issued by the Department for Work and Pensions (DWP) and Her Majesty’s Revenue and Customs (HMRC).
- Classes of National Insurance (NI)
UK has different classes of National Insurance. The class of NI you should pay depends on your personal status and how much you earned.
(1)
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Class 1 Primary National Insurance
For Employees earnings at or above the rate of Primary Threshold (PT).
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(2)
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Class 1 Secondary National Insurance
For Employers paying employees earnings at or above the rate of Secondary Threshold.
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(3)
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Class 1A National Insurance
For employers paying benefits in kind to employees and directors.
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(4)
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Class 2 and Class 4 National Insurance
For self-employed Individual runs business for himself.
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(5)
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Class 3 National Insurance
For individual pays voluntarily National Insurance to fill in or avoid gaps on his State Pension Records
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- National Insurance Contributions Payments
(1)
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NICs are paid by:
(a) employees;
(b) self-employed on their earnings over profit earning threshold;
(c) employers on the earnings earned by and benefits granted to employees.
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(2)
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NICs can be paid by individual voluntarily when:
(a) self-employed whose profit is below profit earning threshold;
(b) filling in the year gap of State Pension Records.
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(3)
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NIC is not levied on:
(a) income from savings;
(b) income from investments;
(c) rental income from property;
(d) private pensions;
(e) state pensions; and
(f) other social security benefits.
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- Purpose of NINO
(1)
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Employment
Most employers in the UK will ask for NINO when on boarding a new employee, it is necessary for payroll purpose.
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(2)
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State benefits
NINOs are used to record Nation Insurance Contributions, which fund various state benefits, including the state pension, jobseeker’s allowance, and maternity allowance etc.
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(3)
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Tax
NINO is crucial for tax purposes, it helps HMRC track people’s income and ensure correct amount of tax is paid, if an individual does not have a NINO, they may be subject to higher tax rate.
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(4)
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Pension
NINO is instrumental in calculating state pension, which is based on national insurance contributions.
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(5)
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Voting
Electoral Registration Office uses NINO to prove the identity when registering to vote.
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(6)
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Student Loan
NINO uses to apply for a student loan with The Student Loans Company.
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(7)
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Investment
NINO also uses to open an individual savings Account (ISA) and authorise financial service providers to help to buy and sell investments like shares, bonds and derivatives.
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- Eligibility
To be eligible to apply for a NINO is to satisfy one of the following criteria:
(1)
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live in the UK;
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(2)
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have the right to work in the UK;
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(3)
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are working, looking for work or have an offer to start work.
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- How to obtain A NINO
In most cases, HMRC will automatically send out an invitation a few months before an individual reaches his/her 16th birthday to apply for a NINO. Application can also be applied online. Documents are needed when apply:
(1)
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A passport from any country;
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(2)
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A biometric resident permit (BRP);
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(3)
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A national identity card from an EU country or from Norway, Liechtenstein or Switzerland.
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- Time to stop paying NI
Stop paying Class 1 National Insurance when someone who reaches the State Pension age. When a self-employed individual reaches his/her State Pension age, stop paying Class 2 National Insurance and Class 4 National Insurance from start of the tax year that is 6 April.
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