What is N I
National Insurance is not strictly a tax. It was originally a contributions-based system of insurance for support from the government in times of need such as ill-health, disability or retirement, paid by workers and employers. The link between individual contributions and benefits has gradually weakened, but the number of years for which you make National Insurance contributions still affects some welfare benefits, including your entitlement to the state pension.
National Insurance contributions (NIC) help to pay for some state benefits including retirement pensions. NIC that you pay can also earn you the right to receive certain benefits.
There are four main types (or ‘classes’) of National Insurance: Class 1 is payable by employees and employers, Class 2 is a flat rate payable by the self-employed Class 3 is voluntary contributions paid by people who want to complete their National Insurance record for benefit purposes, but are not otherwise liable to pay National Insurance, and Class 4, which payable on profits above a set level by the self-employed.