UK National Insurance Rates 2026: Complete Employer & Employee Guide

National Insurance contributions are one of the biggest payroll costs for UK employers, yet the system of classes, thresholds, and rates remains a source of confusion. Getting it wrong means either overpaying HMRC or facing penalties for underpayment.

This guide breaks down every National Insurance class, the current thresholds for 2025/26, and exactly what you need to calculate correctly as an employer.

How National Insurance works in 2025/26

National Insurance funds the State Pension, certain benefits, and the NHS. Both employers and employees pay contributions, but at different rates and through different classes. The tax year runs from 6 April 2025 to 5 April 2026.

National Insurance classes explained

There are several classes of NI, each applying to different groups of workers. As an employer, you primarily deal with Class 1, but understanding the full picture helps when dealing with directors and self-employed contractors.

Class 1: Employees (primary and secondary)

Class 1 is split into two parts. Primary contributions are paid by employees and deducted from their wages through PAYE. Secondary contributions are paid by employers on top of wages.

Class 2 and Class 4: Self-employed

Self-employed individuals pay Class 2 and Class 4 NI through Self Assessment. Class 2 provides entitlement to certain benefits including the State Pension. Class 4 is a profit-based contribution.

Class 3: Voluntary contributions

Class 3 contributions are voluntary and paid by individuals who want to fill gaps in their NI record to protect their State Pension entitlement. The current rate is £17.45 per week. As an employer, you do not need to manage Class 3.

Employer NI: what you actually pay

The employer NI cost sits on top of gross pay and is often the largest hidden cost of employing someone. Since April 2025, you pay 15% on all earnings above the Secondary Threshold of £5,000 per year.

Here is a worked example for an employee earning £30,000 per year:

Earnings above Secondary Threshold: £30,000 - £5,000 = £25,000

Employer NI: £25,000 x 15% = £3,750 per year

That means the true cost of a £30,000 employee is at least £33,750 before you factor in pension contributions, benefits, and other on-costs.

Employment Allowance

The Employment Allowance lets eligible employers reduce their NI liability by up to £10,500 per year (increased from £5,000 from April 2025). This can make a significant difference for small businesses.

To qualify, your employer NI liability in the previous tax year must have been under £100,000. Single-director companies with no other employees are excluded.

How to claim

1. Set the Employment Allowance indicator in your payroll software at the start of the tax year
2. Submit your EPS to HMRC with the claim included
3. Your NI liability will be reduced each pay period until the £10,500 allowance is used up
4. You can claim part-way through the year if you forgot — the allowance applies retrospectively from 6 April

NI for directors

Directors have special NI rules. Instead of the standard per-pay-period calculation, directors' NI can be calculated on a cumulative annual basis. This means their NI is worked out on total earnings from 6 April to the date of each payment, using annual thresholds.

This annual earnings period method prevents directors who pay themselves irregularly (for example, a large dividend-style bonus once a year) from overpaying NI.

Your payroll software should handle this automatically, but you need to ensure each director is flagged correctly in your system.

Employee NI: what gets deducted

Employees pay 8% on earnings between the Primary Threshold (£242 per week) and the Upper Earnings Limit (£967 per week), plus 2% on anything above the UEL.

For someone earning £35,000 per year:

Earnings in the main NI band: £35,000 - £12,570 = £22,430

Employee NI: £22,430 x 8% = £1,794.40 per year (approximately £149.53 per month)

Employees earning below the Lower Earnings Limit (£123 per week / £6,396 per year) pay no NI and do not build up NI credits. Those earning between the Lower Earnings Limit and the Primary Threshold pay no NI but do receive NI credits for State Pension purposes.

NI categories (letter codes)

HMRC uses letter codes to determine the correct NI rates. The most common categories are:

How NI interacts with other payroll obligations

National Insurance calculations feed directly into several other employer duties:

• PAYE reporting: NI figures must be included on every Full Payment Submission (FPS) you send to HMRC. See our guide on PAYE Real Time Information for submission deadlines
• Auto-enrolment pensions: Qualifying earnings for pension purposes use the same earnings band (£6,240 to £50,270), though the calculation is separate. Read our auto-enrolment guide for details
• Payslips: Employees must see their NI deduction clearly on every payslip
• P60s and P11Ds: Year-end summaries must accurately report NI paid

Frequently asked questions

Resources and next steps

Key takeaways

National Insurance is a significant cost that demands careful calculation. The 2025/26 changes — a higher employer rate of 15% and a lower Secondary Threshold of £5,000 — have increased costs for most businesses. Make sure you are claiming Employment Allowance if eligible, using the correct NI category letters, and applying the annual earnings period for directors.

Run your payroll numbers through our Payroll Tax Calculator to verify your NI calculations are correct. If you are still using manual calculations, this is the year to switch to proper payroll software — the margin for error is too small and the penalties too real.