If you’re employed or self-employed, you’re probably familiar with the concept of national insurance. It’s a form of tax that’s deducted from your paycheque (or self-employment profits) alongside income tax when you turn 16 and earn more than a certain amount. But while you might know that you need to make national insurance contributions if you want to receive the state pension, you might be less clear on when you can stop paying national insurance – including whether you need to pay national insurance on income from your pension. This guide will set you straight.
National insurance is a form of tax that’s paid on employment earnings and self-employment profits above a certain level. National insurance contributions are put into a central fund that is used to pay for welfare and other state benefits. These include the NHS, unemployment benefits, maternity allowance and the state pension.
Whether you receive some of these benefits, including the state pension, will depend on you having made sufficient national insurance contributions.
There are several classes of national insurance contributions. The class you’ll pay depend on the nature of your work. This includes whether you’re employed or self-employed. If you don’t have a paid job, or have a career break, you can choose to make voluntary national insurance contributions to ensure you qualify for the state pension. You can find out more about the different national insurance classes and current national insurance rates on the gov.uk website.
You must pay national insurance on any earnings from employment if you’re 16 or over and earn over a certain amount. This is £12,570 a year as of the 2024/25 tax year. If you’re self-employed, this threshold applies to profits, rather than overall income.
You usually stop paying national insurance contributions on the date you reach state pension age, even if you carry on working. If you’re self-employed, you’ll carry on paying Class 4 contributions until the end of the tax year in which you reach state pension age.
As of June 2024, state pension age is 66. It is due to rise to 67 from 2028.
No. National insurance contributions are only paid on income from employment or self-employed profits. You won’t be charged national insurance on any income you receive from a private or workplace pension. This applies even if you start receiving pension income before you reach state pension age.
Not a jot. No matter how much money you receive from your pension, either as a lump sum or as regular income, you won’t need to pay national insurance. Income tax is another matter, as this is payable on most forms of income – including from your pension – even after you reach state pension age.
No. In fact, when you reach state pension age, you stop paying national insurance contributions completely. So, even if you carry on working after retirement, you won’t need to pay national insurance on any employment earnings or self-employment profits.
There’s no need to do any more research into whether you have to pay national insurance on pension income. You don’t. And if you’ve already reached state pension age, you stop paying national insurance on any sort of income.
Whether you need to pay national insurance on employment earnings or self-employed profits before you reach state pension age depends on how much you earn. You can check the thresholds on the gov.uk website. If you work for an employer, your national insurance contributions will be automatically deducted from your pay before you receive it. If you’re self-employed, national insurance contributions will be calculated based on your profits when you submit your tax return. You’ll pay them at the same time as your income tax bill.
"That depends on when and how you retire and what sort of income you receive.
You won’t pay national insurance on any pension income, regardless of when you retire. And if you retire at state pension age, you won’t pay national insurance on any income at all.
However, if you take an early, phased retirement, whereby you stop working full-time but maybe take on part-time employment, then until state pension age any employment income or self-employed profits that exceed the national insurance threshold will be liable for national insurance."
The good news is that you don’t need to pay national insurance on any form of pension income, whether that’s from a private pension, a workplace pension or the state pension. But other taxes, including income tax, may apply if your combined earnings from your pension and other income exceed a certain level per year. For more advice, check our guide on tax and pensions.
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