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When you receive your monthly payslip, it can be overwhelming, especially if you are unfamiliar with the various codes and abbreviations on it. One such code that often appears is “NI contracted in.” This term refers to the National Insurance (NI) contributions that you pay as an employee in the UK.
NI is a tax that UK residents pay to contribute towards state benefits, including the state pension and healthcare. Employers deduct NI from your salary each month and pay it to HM Revenue and Customs (HMRC) on your behalf. As an employee, you also pay a portion of NI, and this is where NI contracted in comes into play.
NI contracted in means that you have chosen to pay the standard rate of NI contributions as part of your employment. This means that you are paying the same amount of NI as most other employed people in the UK. The standard rate of NI contributions is currently set at 12% for those earning over £184 per week, and 2% for those earning over £965 per week.
However, some employees may choose to opt-out of NI contributions, and this is called NI contracted out. This is most common for those who are members of a workplace pension scheme. If you are contracted out, you will have a lower rate of NI deducted from your salary, but this could affect your entitlement to state pension and other benefits later in life.
It`s important to note that NI is separate from income tax, and the two should not be confused. Your tax code will be shown separately on your payslip, and your employer will deduct the appropriate amount of income tax based on your tax code and earnings.
In summary, NI contracted in on your payslip means that you are paying the standard rate of NI contributions as an employee in the UK. It`s an important deduction to be aware of, as it contributes towards your entitlement to state benefits in the future. If you have any concerns about your payslip or deductions, it`s always best to speak to your employer or human resources department for further clarification.