First introduced in 1911, National Insurance has become one of the furthest-reaching forms of taxation in the UK, affecting every working adult in the country.
Run by the Department for Work and Pensions (DWP), the scheme is funded by payments collected by HM Revenue and Customs (HMRC) from both employers and employees, with all monies being paid into the National Insurance Fund.
Public contributions are worked out through the Pay As You Earn (PAYE) system, and the amount owed to the National Insurance Fund should be automatically calculated and deducted from each individual’s pay packet. In the case of the self-employed, HMRC generally ask for quarterly payments at a set rate – though those who earn below certain thresholds are exempt from this.
Originally started in order to provide workers with a form of cover in case of illness, disability or unemployment, the modern day National Insurance is used to fund a number of social security schemes. Most notable of these is the state pension, while a small percentage of the proceeds are used to fund the NHS and other healthcare services.
In the most recent estimates, it was believed that around £92 billion per year is generated through National Insurance contributions in the UK – and after all the outgoings, there is normally a surplus of around £2 billion, which is then loaned to the government. The total surplus in National Insurance Payments is now believed to be accumulated to around £115 billion.