National 5MathsSQAApplications of MathematicsRevision NotesFinancial SkillsPay & SalaryNational Insurance & Deductions

National Insurance & Deductions (SQA National 5 Applications of Mathematics): Revision Note

Exam code: X844 75

Dan Finlay

Written by: Dan Finlay

Reviewed by: Roger B

Updated on

National Insurance

What is National Insurance?

  • Employees in the UK pay contributions of their gross pay towards National Insurance

  • National Insurance payments contribute towards:

    • State Pension

    • Maternity/Paternity Allowance

    • Jobseeker's Allowance

  • The rates depend on how much the employee earns before deductions

    • The earnings are split into three thresholds

2025/2026 National Insurance rates

Weekly

Monthly

Annually

Rate

Up to £242

Up to £1,048

Up to £12,570

0%

From £242 to £967

From £1,048 to £4,189

From £12,570 to £50,270

8%

Over £967

Over £4,189

Over £50,270

2%

Examiner Tips and Tricks

The rates and thresholds are reviewed each year. Therefore, if you are completing past paper questions, then the rates might differ to the table above. Make sure you use the rates given in the question. You do not need to memorise the table!

How do I calculate the National Insurance payment?

  • STEP 1
    Calculate the amount of the person's wage that falls into each of the thresholds

    • e.g. if a person earns £55,000 annually then:

      • £12,570 of it is in the first threshold

      • £50,270 - £12,570 = £37,700 of it is in the second threshold

      • £55,000 - £50,270 = £4,730 of it is in the third threshold

  • STEP 2
    Multiply each of these amounts by the relevant percentages

    • e.g. if a person earns £55,000 annually then:

      • 0% × £12,570 = £0

      • 8% × £37,700 = £3,016

      • 2% × £4,730 = £94.60

  • STEP 3
    Add together the contributions from each of the thresholds

    • e.g. if a person earns £55,000 annually then:

      • £0 + £3,016 + £94.60 = £3,110.60

Examiner Tips and Tricks

If the rate for the first threshold is 0%, then you can skip this threshold, as 0% of any amount is 0.

Worked Example

George earns £1150 a week.

National Insurance is calculated on a person's wage before deductions such as pension contributions.

National Insurance rates (weekly)

Up to £242

0%

Between £242 and £967

8%

Above £967

2%

Calculate George's weekly National Insurance payment.

Answer:

STEP 1

Calculate the amount of George's wage that falls into each of the thresholds

  • Find the amount at the 8% rate

£ 967 minus £ 242 equals £ 725

  • Find the amount at the 2% rate

£ 1150 minus £ 967 equals £ 183

STEP 2

Multiply each of these amounts by the relevant percentages

table row cell 8 percent sign cross times £ 725 end cell equals cell 0.08 cross times £ 725 end cell row blank equals cell £ 58 end cell end table

table row cell 2 percent sign cross times £ 183 end cell equals cell 0.02 cross times £ 183 end cell row blank equals cell £ 3.66 end cell end table

STEP 3

Add together the contributions from each of the thresholds

£ 58 plus £ 3.66 equals £ 61.66

£61.66

Income Tax & pension contributions

What is Income Tax?

  • Employees in the UK pay contributions of their gross pay towards Income Tax

  • Income Tax payments contribute towards public services, including:

    • healthcare such as the NHS

    • education

    • transport

  • The rates depend on how much the employee earns before deductions

    • The earnings are split into thresholds similar to National Insurance

Examiner Tips and Tricks

In the exam, it is unlikely that you will be asked to calculate the income tax amount. Instead, the question will state the amount to be paid by the employee.

What are pension contributions?

  • Employees in the UK pay contributions of their gross pay towards their private pensions

  • This is in addition to the State Pension that the person receives when they retire

  • Employees normally pay a percentage of their wage/salary to their pension

Examiner Tips and Tricks

In the exam, you will be told the percentage of the gross pay which is paid into the pension.

Worked Example

Terry's annual salary is £44,200.

Terry pays 7.5% of his annual salary into his pension.

He is paid in 52 weekly payments.

Calculate the weekly amount that Terry pays into his pension.

Answer:

Calculate how much Terry pays into his pension each year

table row cell 7.5 percent sign cross times £ 44 comma 200 end cell equals cell 0.075 cross times £ 44 comma 200 end cell row blank equals cell £ 3315 end cell end table

Divide this into 52 weekly payments

£ 3315 divided by 52 equals £ 63.75

£63.75

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    Author
    Reviewer
    Dan Finlay

    Author: Dan Finlay

    Expertise: Maths Subject Lead

    Dan graduated from the University of Oxford with a First class degree in mathematics. As well as teaching maths for over 8 years, Dan has marked a range of exams for Edexcel, tutored students and taught A Level Accounting. Dan has a keen interest in statistics and probability and their real-life applications.

    Roger B

    Reviewer: Roger B

    Expertise: Maths Content Creator

    Roger's teaching experience stretches all the way back to 1992, and in that time he has taught students at all levels between Year 7 and university undergraduate. Having conducted and published postgraduate research into the mathematical theory behind quantum computing, he is more than confident in dealing with mathematics at any level the exam boards might throw at you.