National Insurance (NI) is a tax on earnings that the vast majority of people have to pay, but do you know the difference between employer and employee National Insurance?

Any person aged 16 or over who is either an employee earning more than £242 per week from one job or self-employed and making a profit of more than £12,570 per year has to pay NI contributions.

The payment of these contributions qualifies individuals to receive certain social security benefits, mainly state pension.

Overall, NI is also the UK's second-biggest tax which is expected to raise just under £170 billion in 2024–25, according to Tax Lab.

NI contributions (NICs) are divided between the employee and the employer but how exactly does it all work?

What is the difference between employer and employee National Insurance?

Tax Lab breaks down the difference between the two as employee "NICs are taken out of earnings, whereas employer NICs are paid on top of earnings".

If you have an employer, you’ll pay Class 1 National Insurance, and the amount you’ll pay depends on how much you earn, Money Helper explains.

In terms of weekly earnings the NI rate would break down as follows:

  • £0 to £242 - 0% NI Insurance rate 
  • £242.01 to £967 - 8%
  • Over £967 - 2%

For example, if you earn £1,000 a week, you pay:

  • nothing on the first £242
  • 8% (£58) on the next £725 
  • 2% (66p) on the next £33

Money Helper adds: "This is calculated each time you get paid, so you could pay different amounts if your pay changes each time."

If you are self-employed your NICs depend on how much profit you make in a financial year, with more information available on the Government website here.

Meanwhile, employers pay NICs for most workers earning more than £9,100 a year, according to The Guardian.

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They explain: "The sum they pay is the equivalent of 13.8% of the employee’s earnings above that threshold, so for an employee earning £30,000 the employer would pay NICs of £2,884.20.

"The contributions do not come out of the employee’s salary, but are paid on top of that.

"Currently employers do not pay NICs on payments they make into their employees’ pension pots."