Basics of National Insurance

National insurance is basically a tax that funds public services in the United Kingdom. It was first introduced by the famous liberal Lloyd George in 1911 as a means of helping those who could not work due to sickness. It is paid by anyone who is currently working, and goes towards funding unemployment benefits, somewhat similar to the welfare system. It was first introduced to benefit men between the ages of 17 and 70, because in those days these were the only people that were likely to be working. However later after world war two when the role of women in the workplace had changed significantly, the national insurance scheme was changed to encompass anyone of either gender that was working.

When people in the United Kingdom reach the age of 16, which is the age that you can legally begin working full time as well, you are given a national insurance card. This is simply a card with your name and a national insurance number on it, which you then give to any future employers so that you can pay national insurance using your own unique number. This then allows the government to monitor how much national insurance you are paying and how much your employer is contributing on top of that.

Basically the more you earn then the more national insurance you will pay, similarly to income tax. However unlike income tax it is not devised in such small increments. Rather it is calculated in three stages. These are low earning limit, earnings threshold and high earning limit. Every time your earnings for the year pass through one of these brackets your contribution level goes up.

The same national insurance number is then used if you ever need to claim benefits due to unemployment. The number in this case making sure that you are a legal resident of the United Kingdom and that you have legal entitlement to these funds. You also need to have contributed to the national insurance in the past to be able to claim. Because this tax is paid whatever occupation you do, national insurance is also used to monitor people suspected of tax fraud or money laundering etc.

In general national insurance is paid automatically through your wages. When you receive your payment statement it will have a column for deductions, in which national and income taxes will have been already removed for you. This is generally easier then working it our for yourself. But if you own a company or are self-employed then you will usually need to make payment yourself. Although these can be arranged on a quarterly basis rather then per week or month.

You can also use national insurance to claim a state pension as well. A requirement is that you have paid into the scheme for over ten years. However because of an aging population in Britain today as in many other parts of the world it looks as if the national pension scheme wont be around that much longer. And the government will likely use the money it saves on the growing unemployment and disability benefits that it pays out every week.