National Insurance (NI)
A second tax on earnings that also builds your entitlement to the State Pension and some benefits.
National Insurance is charged on earnings from work (unlike income tax, it does not touch savings, dividends or pensions). It comes in classes: Class 1 for employees, Class 4 for the self-employed, and voluntary Class 2 and 3 contributions that plug gaps in your record. Employers pay their own Class 1 at 15% on top of wages.
NI matters twice: as money off your payslip now, and as the qualifying-years record that decides your State Pension later. You need 35 qualifying years for the full new State Pension, and checking your record for gaps is one of the highest-value financial checks most people never make.
An employee on £30,000 pays £1,394.40 of NI a year (8% of the £17,430 above the threshold), while their employer pays £3,750 on top (15% above £5,000). Neither payment touches savings interest, dividends or pension income, which is one reason retirees' tax bills look so different from workers' on the same income.