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.
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.
Frequently Asked Pensions Advice Questions
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