WikipediaExtracts:National Insurance
Extracted from Wikipedia --
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National Insurance (NI) is a form of tax charged in the United Kingdom on employees, self-employed people and employers. Payment of this tax are usually referred to as National Insurance Contributions (NICs). National Insurance is the Government of the United Kingdom's second-biggest source of revenue.
National Insurance is connected to the welfare state in the United Kingdom, since payment of NI contributions establishes entitlement to certain state benefits for workers and their families. The benefit component includes several contributory benefits, availability and amount of which is determined by the claimant's contribution record and circumstances. Weekly income and some lump-sum benefits are provided for participants upon death, retirement, unemployment, maternity and disability. In order to obtain the benefits which are related to the contributions, a National Insurance number is necessary.
Introduced by the National Insurance Act 1911 and expanded by the Attlee ministry in 1948, the system has been subjected to numerous amendments in succeeding years. Initially, it was a contributory form of insurance against illness and unemployment, and eventually provided retirement pensions and other benefits.
Currently, workers pay contributions from the age of sixteen years until the age they become eligible for the State Pension. NI Contributions are due from employed people earning at or above a threshold called the Lower Earnings Limit, the value of which is reviewed each year. Self-employed people contribute through a percentage of net profits above a threshold, which is reviewed periodically. Contributions are collected by HM Revenue and Customs (HMRC). For employees, this is done through the PAYE (pay-as-you-earn) system along with income tax, repayments of student loans and any apprenticeship levy which the employer is liable to pay. Individuals may also make voluntary NI Contributions to fill a gap in their contributions record and thus protect their entitlement to benefits.
