National Insurance vs. Income Tax

I pretty much understand UK income tax (tax free allowance, 10%, 22%, 40%, deduction, allowances etc).  but how is national insurance worked out?  it looks like during the past 3 years, my national insuranace contribution has remianed constant (irestective of change in salary, etc).  does this number go up and down?  how is it figured out?  it goes to pay for the NHS and pensions? 

National Insurance is the equivilent of Social Security back in the US.  We have a Totalization Agreement between our two countries which covers NI & SS.  The money comes in mostly from the employer - you pay a flat %, which goes down to 1% at some ungodly large sum of wages, but your employer continues to pay 12.xx% no matter how high your wages are.  This is different from the US, where after about $90,000 of wages both you and your employer's contributions go down to 1.xx% for Medicare. 

The money goes to retirement benefits and the NHS.  If you are one of the rare people who don't have to contribute to the NI, technically you aren't allowed to use NHS hospitals & doctors.  In practice, they let you as it's too much trouble to keep track of the tiny minority who aren't allowed.

right now i think i'm paying like 9% of my monthly salary in national insurance contributions.  is my employer paying the remaining 3%?

No, he's paying 12.xx% in addtion to your 9.xx%

so the higher my salary gets, the less of a percentage i pay?  it will remain constant at approx £180 month?

Lizzit is plain wrong:

1. National Insurance goes straight to the Treasury.  It is a tax totally unrelated to any items of government spending.
2. National Health services do not require payment of NIC. Otherwise babies would not qualify!
3. Visitors to the UK cannot however use the NHS for free. 

If you earn above the cap then your NI only goes up a tiny bit, just like in the USA...

For the 2005-2006 year you pay the following NI:

Nothing on the first 4,888 of income
11% on annual income between 4,888 and 32,760
1% on income above 32,760

You can actually reduce the taxes you pay to this by "contracting out" of the system.  This means instead of paying into the UK social security system, a portion of your tax goes into your own retirement plan (like a US 401K or IRA).  This means you get less from the government when you retire but you may not care if you're not staying until you retire.  I'm in the process of doing this right now.

contracting out of UK SP2 national insurance is a VERY high risk strategy because you are gambling that your investment return after charges can buy an annuity that will beat the inflation proofed additional pension that the UK government is guaranteeing.  The fact that you may only be contributing to the UK system for a very short time frame will not matter because the US/UK social security agreement guarantees a partial UK pension will be paid in any case.

The only reasons a Brit would contract out today would be either short life expectancy (eg he/she will die before pension age) or because a lump-suum is desired at age 55.  An American would not normally take a lump-sum before age 59.5 because of the 10% penalty so the justification for an American contracting out is hard to see.