National Insurance is a social insurance scheme, into which an employee and their employer contributes, and as such the employee becomes eligible for particular social security benefits – known as "contributory benefits".
Like income tax, national insurance contributions are deducted at source from people's earnings.
National insurance contributions are designed to pay for healthcare and pensions, as well as for benefits – should a person lose their job or be prevented from working.
Persons employed and earning more than £102 and less than £817 a week pay 11 per cent of this to national insurance and one per cent on earnings above that.
Self employed persons pay a flat rate national insurance contribution of £2.50 a week – plus eight per cent of their profits (between £5,315 and £42,475) and one per cent on profits above that.