Dr Ed Cantelo, GP, Chartered Accountant and Chartered Tax Adviser. Medics Money co-founder

We all know that our payslips include an amount for National Insurance Contributions but what is it, can it be reduced and, if not, is there anything that Doctors need to be mindful of when considering their National Insurance Contributions? In this blog we go into the basics of National Insurance to give everyone an understanding of what it is and how it is calculated before discussing circumstances in which you might be overpaying your contributions and what to do about it if you are. There is a huge amount to say about National Insurance – here we just stick to the basics and most important points; most people have some familiarity with Income Tax but a lot of people are completely in the dark when it comes to one of the biggest expenses they’ll pay through their lives.

About National Insurance Contributions (“NIC”)

NIC is a very important money-raiser for the Government bringing in around one-fifth of total Government revenue (though I suppose this may have been changed by Covid.) The National Insurance Contributions Office (or “NICO”), a division of HM Revenue and Customs, is tasked with the collection of NIC. As most of you will know NIC for employees is collected via the PAYE system and deducted from your pay cheque each month.

National Insurance Contributions were created to provide funding for the Social Security system – retirement benefits such as the state pension, Universal Credit and so on. If the amount raised by NICO through NIC is insufficient to cover the needs of the benefits system, the Treasury makes up the shortfall. You need to pay National Insurance to be able to claim some of these benefits and if you don’t have a full National Insurance record you may not be eligible for the full amount. So for example based on my age and pensionable age, I need 28 years of contributions in order to be entitled to the full state pension when I retire.

Every employee pays National Insurance from the day they turn 16 and will stop paying when they reach pensionable age. So, if you work past your pensionable age you shouldn’t have to pay National Insurance.

The Types of National Insurance

There are six types of National Insurance but I’ll only mention three here.

For employees the key type of National Insurance is called Class 1 Primary National Insurance which is paid on earnings from employment. Class 1 Secondary National Insurance is paid by employers on these earnings (it is these employer contributions that account for the majority of the revenue raised from NIC.)

For self-employed individuals (which may be relevant for those locuming for example) the following are relevant:

  • Class 2 National Insurance is paid by self-employed people earning more than £6,475 and is charged at a flat weekly rate which is currently £3.05 per week.
  • Class 4 National Insurance is paid on profits from trade

Calculating Your Employee NIC

Class 1 Primary contributions are paid by employees on earnings in an “earnings period” which for most UK employees including doctors is a monthly earnings period – i.e. we receive our salary etc on a monthly basis.

For employees who receive their remuneration monthly like us, no NIC is charged on the first £792 per month of an employee’s earnings. This is called the “primary threshold” (PT) and you can think of it like a Personal Allowance but for NIC. On earnings between £792 per month and £4,167 per week (i.e. £3,375), the main rate of Class 1 NIC is 12%. The monthly limit of £4,167 is called the “upper earnings limit” (UEL). Employees also pay Class 1 NICs at the additional rate of 2% on earnings in excess of the upper earnings limit ie above £4,167 per month.

It might be easiest to show you an example using my payslip from July 2020.

Payslip image

This is my total pay for that month (the standard GPST3 salary which is on public record). The total comes to £4,837.65.

According to my payslip, my National Insurance Contributions that I made in the month were:

How is this number derived?

In the month, for earnings up to £792 NIC is charged at 0%. That leaves £4,045.65 that is chargeable to NIC. The next £3,375 is chargeable at 12% so that comes to £405. Finally the remainder above £3,375 is charged at 2% so £4,045.65 – £3,375 = £670.65 @ 2% = 13.41. 

The total National Insurance Contributions that I owed then comes to £405 + 13.41 = £418.41 which is the amount shown on my payslip. I don’t expect you to do this calculation, I just wanted to show you how it is calculated.

What about Self-employed Doctors?

GP Locums and those going into private practice may be self-employed instead of employees. In that case the above still applies with two differences. Firstly National Insurance is charged on profits made, this is called Class 4 National Insurance. Secondly on profits between £792 per month and £4,167 per week (i.e. £3,375), the main rate of Class 4 NIC is 9% so slightly lower than for employees (12%).

Self-employed doctors who earn more than £6,475 also have to pay Class 2 National Insurance which is charged at a flat weekly rate of £3.05 for the 2020/21 tax year. 

For completeness companies do not pay NIC but note that if a salary if paid out of the company in order to extract the money in the company, Employer’s NIC will need to be paid.

Can I reduce my NIC bill like I can my Income Tax bill?

Unfortunately, unlike income tax, employees cannot deduct their professional expenses or other costs to reduce the amount of NIC that is payable.

Anything that reduces the profits of a self-employed individual, however, should reduce the liability to Class 4 NIC. 

Is there anything else important to know about NIC?

Yes. For employees, keep an eye on your National Insurance Contributions (NIC) if you have more than one job in the tax year, for example if you locum. As we said above NIC is charged against salaries for employed doctors and against profits for self-employed individuals. In the 2020-21 tax year the first £9,500 of your salary / self-employed profits will be free from NIC but between £9,500 and £50,000 of NIC is charged at 12% on salaries and 9% on self-employed profits. Above £50,000 2% NIC is charged.

The thing to note is that the rates are charged on total amounts. Unfortunately, if you work for multiple different employers, they may charge you as if that job was your only one for NIC.

An example might make this clearer: suppose you work for one employer for £80,000, you should pay NIC as follows:

£0 – £9,500 – 0% NIC                      £0

£9,500 – £50,000 – 12% NIC   £4,860

>£50,000 – 2% NIC                     £600

Total NIC for Dr 1                    £5,460

Now imagine you have two jobs – both pay £40,000 (so your total is £80,000 just like the first doctor)

Job 1 NIC:

£0 – £9,500 – 0% NIC                      £0

£9,500 – £40,000 – 12% NIC   £3,660

Job 2 NIC:

£0 – £9,500 – 0% NIC                      £0

£9,500 – £40,000 – 12% NIC   £3,660

Total NIC for Dr 2                    £7,320

You can see that Doctor 2 has overpaid NIC by £1,860 because both employers have charged NIC on the individual salary ignoring the other. This may not happen but watch out for it. If you think you have overpaid NIC then you can contact the National Insurance Contributions Office (NICO) for help. They will send you a form to fill out that asks for the amounts of NIC you paid (oddly as they really should already have this information) and, if you have overpaid, they will refund you.

The above may also be the case if you have both employed and self-employed income – it is the total that matters, not the income received from any one source so you may overpay in this situation too. In this instance, things get complicated (because some NIC is charged at 12% and some at 9% but again above £50,000 only 2% should be charged) so you may want to discuss this with NICO.


This blog is all about our aim to empower doctors to understand their finances and where their money is going. Most of this is informational – but definitely watch out for situations where you may be overpaying your NIC and if you decide to be self-employed make sure you budget for 9% of your profits (and then 2% over the upper threshold) being payable to NICO.