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Social Security & Taxation

Social Security in the UK

If you are planning to relocate to the UK, it will affect your personal finances. Don’t just think about short-term costs! It’s never too early to consider financial cushions or retirement planning. Our in-depth guide explains how social security, pensions, and other government benefits work in the UK.

The UK Social Security System Over Time

Did you know that contemporary pensions in the UK, as well as the entire social security system, go back well over a century? In 1908, the Old-Age Pensions Act laid the foundation for a modern welfare state. Three years later, the National Insurance Act introduced the concept of sick pay, maternity benefits, and unemployment benefits for wage earners.

There have been countless reforms to the UK’s social security schemes ever since, including the NHS Service Acts from the late 1940s. They established the National Health Service, i.e. public health insurance in the UK.

The latest legislations concerning social security in the UK include the UK Pensions Act of 2011 and the Welfare Reform Act 2012. These measures have introduced several controversial changes, e.g. regarding UK pensions, disability assessments for people unable to work, or so-called “back-to-work schemes”.

However, British citizens can still claim a variety of financial benefits in times of need. These include, for example, next to the Universal Credit, Jobseeker’s Allowance, Maternity Allowance, and other benefits.

Before We Start: Things You Need to Know

We cannot possibly cover all details about pensions and social security benefits in the UK in this guide. Some general points should be of interest, though:

Nonetheless, a few aspects of the UK social security system are highly relevant for expatriates. Everyone should have an idea of how pensions in the UK work and what happens in case you are let go from your job in the UK.

The UK Pension System: How It Works

UK pensions can be saved for in three different ways. The three basic pillars of British social security for retirees are:

Like most other benefits, UK pensions, as provided by the state, are funded by a mixture of contributions from employees, employers, and the government. We will explain the UK pension scheme in more detail on the next page of this article.

How to Register for National Insurance

All workers, employees, and self-employed people living in the UK have to pay into the so-called National Insurance funds — provided they have a certain minimum income. In 2016, this income limit was 112 GBP per week for employed residents, or 5,965 GBP per year for the self-employed. If you don’t fulfill these criteria, you can still contribute on a voluntary basis.

When you start working in the UK, you definitely need to get a National Insurance (NI) number. Whether or not you are planning to stay permanently, you have to contribute financially to UK pensions and other insurance schemes if you earn above those limits. For your NI registration, please phone the application hotline once you arrive in the UK (0345 600 0643, Monday – Friday 08:00–18:00 GMT). The staff will help you set up an appointment for a personal interview. If you are in possession of a biometric residence permit (BRP), your NI number may already be printed on its back.

National Insurance Contributions: How Much You Have to Pay

Once you have your NI number, you are assigned a specific NI class that determines the amount of your contributions to the British social security system. Employees usually belong to NI Class 1. In 2016/17, they have to pay 12% of their weekly earnings between 155 GBP and 827 GBP, as well as 2% of all earnings over 827 GBP per week.

Self-employed expats fall into both NI Class 2 and NI Class 4. They have to pay a flat rate of 2.80 GBP per week and a certain share of their annual taxable profit. The latter normally amounts to 9% of profits between 8,060 GBP and 43,000 GBP, as well as 2% of all earnings above that limit.

National Insurance contributions — which can be adjusted annually — are automatically deducted from your salary. They are used, among other things, to finance state pensions.

The Universal Credit System: Six Benefits in One Payment

As mentioned before, some of the means-tested benefits in the UK are gradually being replaced by the Universal Credit System. This is going to replace six separate income related benefits: Housing Benefit, income-based Jobseeker’s Allowance, Working Tax Credit, Child Tax Credit, income-based Employment and Support Allowance, and Income Support. People claiming one of these benefits will have to move to Universal Credit eventually. You can claim Universal Credit if you meet the following requirements:

Contrary to other benefits, Universal Credit is paid monthly. How much you receive depends on your circumstances and income. The basic standard allowance for a single person over 25 is 317.82 GBP a month. On top of that you may claim additional amounts if you’re eligible.

You may receive additional support on top of your standard allowance for:

Universal Credit is currently only available for single persons living in England, Wales, and Scotland, as well as couples or families living in certain areas. Check the UK government’s website for more information.


We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete. 

InterNations Expat Magazine