National Insurance (NI)
A UK payroll deduction that funds state benefits and the State Pension, separate from Income Tax.
National Insurance is deducted from UK earnings above a threshold, at a main rate applied up to an upper earnings limit and a lower rate above it. It's calculated separately from Income Tax and funds entitlement to certain state benefits, including qualifying years toward the State Pension.
Worked Example
On earnings between the primary threshold and the upper earnings limit, NI is charged at the main rate; earnings above that upper limit are charged at a lower rate — meaning, unlike Income Tax, the rate can effectively fall as pay rises past that point.
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