Generally, most contractors entering the UK will have the same set of questions when they receive their first paycheck, one question that stands out is, what is National Insurance and why do I need to contribute to it? Your NI number acts almost like your personal account number.
The number ensures that NI contributions and taxes you pay are properly recorded on your records. You pay Insurance to increase your entitlement to certain social security benefits, including the State Pension, unemployment benefits, and disability benefits. This number also serves as a reference number for the entire UK social security system. Each employee’s National Insurance consists of two parts, namely NI Employees and Entrepreneurs.
There are various ways to reduce your liability. The main way for contractors to achieve this is by using the services of an Umbrella Company or Limited Liability Company. Under this payroll structure, contractors can greatly reduce their taxable wages by claiming expenses entirely and exclusively for business purposes. This, in turn, reduces the dues. Another way in which you can save is by claiming a discount.
Most contractors are not aware that they can claim back contributions while working in the UK. It should be mentioned that you cannot claim your full contribution but only a part of it. Rebates allow you to transfer all of the money from your 2nd state pension into a personal retirement policy drawn up in your own name. National Insurance Rebate can be claimed at any time and only needs to be done once, please note that you cannot back date your NI claim, you can only claim for the current tax year and years to come.
