Motley Fool's guide to National Insurance

The Motley Fool has published a simple guide to the various UK National Insurance (NI) types - Classes 1 to 4, and what you get for your money...

"The trend is for NI to be merged with the tax system. In fact there was, and still is, a crazy system of different rules applying to the levels at which tax and NI were applied to incomes requiring in effect two distinct sets of computations to be applied to the same income, in order to determine NI liability on the one hand and income tax on the other. Eventually there may be a unified system, but we are still a long way from that.

Broadly speaking, the principal difference between income tax and NI is that the former applies to income of all types, but the latter applies only to what might loosely be termed earned income. This is income from employment and self-employment. Specifically, investment income from things like interest, dividends or rent is excluded from NI, although liable in general to income tax."

You can read the article here.