Do I pay National Insurance on my pension contributions?

Do you get National Insurance relief on pension contributions just as you get tax relief?

Question asked by Ms A Li
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Answered by Michael Englefield

Is NI payable on pension contributions?

Yes, you do have to pay National Insurance contributions on money going into your pension.

You rightly state that you don’t pay income tax on pension contributions, but National Insurance is still due on cash you put into your pension.

If you’re employed, your employer will deduct National Insurance contributions from your wages before you get paid, so before any tax or pension contributions have been deducted.

calculating-national-insurance-on-pension-contributions

Your payslip will show the National Insurance contributions you’ve made over the year. If you earn above the £8,060 National Insurance threshold for the 2016/17 tax year, you pay 12% of your earnings. This rate drops to 2% on anything you earn above £43,000.

If you’re self-employed you pay Class 2 contributions of £2.80 a week for 2016/17 on all earnings above £5,965, plus Class 4 contributions of 9% of taxable profits between £8,060 and £43,00. On profits over £43,000, Class 4 contributions are 2% of profits. Again, these contributions are made from your profits before tax is deducted and any pension contributions have been made.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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