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11. National Insurance contributions (NICs)

Most people who work in the UK pay National Insurance contributions (NICs) in addition to paying tax. There are six classes of contributions, some of which count towards certain Social Security benefits.

When you leave the UK you might still have to continue paying UK NICs and when you come to live in the UK, you might have to start paying them.

What NICs you pay will depend on whether:

  • you are going to or coming from a European Economic Area (EEA) country (including Switzerland), or
  • you are going to or coming from a country with which the UK has a bilateral Social Security Agreement, or
  • you are going to or coming from another foreign country which is not within the EEA (including Switzerland) and which does not have a bilateral Social Security Agreement with the UK.

11.1. European Economic Area (EEA) countries

The EEA countries are the Member States of the European Union and Iceland, Liechtenstein and Norway.

Switzerland is not a member of the EEA but there is an agreement between Switzerland and the EU which means that the EU rules on National Insurance and Social Security also largely cover Switzerland.

11.2. European Union (EU) countries

At April 2010, as well as the UK (including Gibraltar as the UK applies the EC Regulations to Gibraltar as though it is another EEA country, and other EEA countries treat Gibraltar as though it is part of the UK), the Member States of the European Union are:

11.3. Countries with bilateral Social Security Agreements in force with the UK

At April 2010, the following countries have bilateral Social Security Agreements in force with the UK which cover NICs. Some of these agreements include the Isle of Man, Guernsey and Jersey as part of the UK. Where that is the case, the benefits and obligations of the agreement will also apply to those countries:

1. The Republics of the former Yugoslavia – This and references to ‘The Republic’ means the Republics of Bosnia-Herzegovina, Croatia, Kosovo, the former Yugoslav Republic of Macedonia, Montenegro and Serbia. Slovenia is a Member State of the EU and is treated in line with other EEA countries.

2. The Double Contributions Convention (DCC) with the Republic of Korea and Japan only cover Social Security contribution liability.

11.4. If you are going abroad

11.4.1. Going abroad to an EEA country

If you are going to another EEA country, the European Community Social Security Regulations apply. The general rule is that you will be subject to the Social Security legislation of the country in which you work but there are some exceptions.

The exception rules that apply within the EEA and Switzerland depend on whether:

  • you are an EU national and the other countries are EU member states, or
  • you are a non-EU national legally resident in a Member State, or
  • the other countries involved are Iceland, Norway, Liechtenstein or Switzerland.

Exceptions when going abroad to an EU country

If you are an EU national and a UK employer sends you to work in another EU country for a period not expected to be more than 24 months at the outset, you and your UK employer will usually continue to pay UK NICs as if you were still in the UK. Your employer will need to apply on your behalf to NIC&EO International Caseworker for form A1. This form confirms that you will continue to pay UK NICs while working in the other country and will ensure that you are not required to contribute to the other country’s Social Security scheme.

Similar rules exist for employees who are not EU nationals but who are legally resident in the UK and for people going to Iceland, Norway, Liechtenstein or Switzerland. Where you are sent to work in another Member State for a period not expected to be more than 12 months at the outset, you and your employer will usually continue to pay NICs as if you were in the UK. Your employer will need to apply on your behalf to NIC&EO International Caseworker for form E101. If the work lasts longer than expected, you can apply for form E102 which will allow you to pay UK NICs and exempts you from foreign social contributions for a maximum of a further 12 months that you are abroad. The other Member State has to agree with HMRC to the extension for form E102 to be issued.

You will need to ensure that you have a valid EHIC to provide cover for healthcare for you and any of your family who accompany you for the period of employment in the other country.

Similar rules apply if you are self-employed. You must contact NIC&EO International Caseworker Newcastle and also ensure that you obtain EHICs to provide healthcare cover for yourself and any of your family who accompany you for the period of self-employment in the other country. There are different rules if you belong to one of the following groups.

  • Those who normally work in more than one country.
  • Seafarers (mariners).
  • Transport workers.
  • Civil servants.
  • Members of the staff of diplomatic or consular posts
  • Those who work for a member of the staff of a diplomatic or consular post.
  • Members of the staff of the European Union.
  • Members of Her Majesty’s forces.
  • Civilians who work for Her Majesty’s forces in Germany, or for an organisation like NAAFI which serves Her Majesty’s forces.

In many of these cases, you may have to continue to pay UK NICs.

If you work in another EEA country in any other circumstances (for example, for a foreign employer) or you intend to remain abroad indefinitely, you will probably have to pay Social Security contributions to the other country’s scheme. If so, you will not be required to pay UK NICs. But it might be possible for you to pay UK voluntary NICs to protect your basic UK pension rights.

11.4.2. Going abroad to a country which has a bilateral agreement covering NICs with the UK

If you are going to a country with which the UK has a bilateral Social Security Agreement covering NICs, the position will depend on the terms of the particular agreement. The general rule is that you will be subject to the social security legislation of the country in which you work but there are some exceptions.

Exceptions when going abroad to a country which has a bilateral agreement covering NICs with the UK

If your employer sends you to a country with which the UK has an agreement, you may be required to continue paying UK NICs as if you were still in the UK. How long you continue to pay UK NICs will depend on the particular agreement. Your employer will need to apply on your behalf to NIC&EO International Caseworker Newcastle for a certificate confirming that UK NICs continue to be paid while you are working in the other country. This will ensure that you are not required to contribute to the other country’s Social Security scheme.

Unlike the EEA, there is no general provision for healthcare in most bilateral agreements. You or your employer should consider your healthcare provisions while working in such countries.

Some agreements include provisions which may allow you to continue paying UK NICs for longer than the normal period under the agreement.

If you are self-employed, not all agreements will cover you. In the case of those that do, similar rules apply as for those in employment.

Certain agreements contain special rules for particular groups, such as civil servants, mariners or transport workers.

If you work in a country with which the UK has an agreement in any other circumstances, for example, for a foreign employer, or you intend to remain abroad indefinitely, you will probably have to pay social security contributions to the other country’s scheme. If so, you will not be required to pay UK NICs. But it might be possible for you to pay UK voluntary NICs to protect your UK basic pension rights.

11.4.3. Going abroad to another country which is not within the EEA and does not have a bilateral agreement covering NICs with the UK

If you are going to a country which is not within the EEA and does not have a bilateral Social Security Agreement with the UK, the position will depend on the domestic rules there.

If your UK employer sends you to work in a country outside the EEA and not covered by a bilateral agreement, you will be required to continue paying UK NICs for the first 52 weeks of employment in the other country where all of the following conditions apply.

  • Your employer has a place of business in the UK.
  • You are ordinarily resident in the UK.
  • You were resident in the UK immediately before starting the work abroad.

No certificate is required to confirm that you continue to pay UK NICs. Some countries will require you, in addition to your UK NICs, to contribute to their Social Security scheme. After 52 weeks you are not required to continue paying UK NICs, but you may pay voluntary NICs to protect your UK basic pension rights.

Should you decide not to pay voluntary UK NICs, your National Insurance record will still be protected for certain Social Security benefits (but not State Pension or widow’s benefit) on your return to the UK.

11.5. If you are arriving in the UK from abroad

If you arrive here from abroad and take up employment or take up self-employment, you will generally be required to pay UK NICs as soon as you arrive and start work but there are some exceptions to this rule.

11.5.1. Arriving in the UK from an EEA country

If you are an EU national and an employer in another EU country sends you to work in the UK for up to 24 months, you may be able to continue paying Social Security contributions in the other country, rather than in the UK. If form A1 has been issued by the foreign Social Security institution, confirming that you continue to contribute to the foreign scheme, you will not have to pay UK NICs. Similar rules exist for nationals of Iceland, Liechtenstein, Norway and Switzerland and non-EEA nationals residing in an EEA country who are sent to the UK to work for a period not expected to exceed 12 months and who have a form E101 issued by the foreign Social Security institution confirming that you are continuing to contribute to the foreign scheme.

There are similar provisions for self-employed people who are working temporarily in the UK.

11.5.2. Arriving in the UK from a country with a bilateral agreement

If you are sent to work temporarily in the UK by an employer in a country with which the UK has a bilateral Social Security Agreement covering NICs, you may be able to continue paying foreign Social Security contributions. If a certificate is issued by the foreign Social Security institution, confirming that you continue to contribute to the foreign scheme, you will not have to pay UK NICs.

11.5.3. Arriving in the UK from another country which is not within the EEA and does not have a bilateral agreement covering NICs with the UK

If you are not covered by the special rules for people coming from the EEA or Switzerland, and not covered by a bilateral Social Security Agreement, you may be exempt from National Insurance for up to 52 weeks, providing that you meet all of the following criteria.

  • You are not ordinarily resident in the UK.
  • You normally work outside the UK for a foreign employer.
  • You are sent to work in the UK for a time by that foreign employer
  • When in the UK you work for that employer.

Under this rule neither you nor your employer has to pay UK NICs for the first 52 weeks of your employment in the UK. NICs are payable from the 53rd week. If you do not meet these criteria you will be liable to pay NICs from the start of your employment in the UK.

If the foreign employer does not have a place of business in the UK and your employer makes you available to work in another business in the UK, NICs are due from that UK ‘host’ employer.