Class 1 National Insurance contributions are the NICs charged on an employee's earnings, paid through payroll. There are two parts. The employee pays primary contributions of 8% on earnings between £242 and £967 a week (£12,570 to £50,270 a year) and 2% above that. The employer pays secondary contributions of 15% on earnings above £96 a week (£5,000 a year), with no upper limit. These are the 2026/27 rates and thresholds.
What Class 1 is, and how it differs from the other classes
National Insurance is divided into classes by the kind of person and the kind of payment. Class 1 is the employment class: it applies to anyone paid as an employee, including company directors, who are office-holders. Self-employed people pay Class 4 on profits instead, with Class 2 now voluntary for most. Class 3 is a voluntary contribution to fill gaps in a contribution record.
Two related classes are paid by employers only, and are often confused with Class 1:
- Class 1A. Charged at 15% on taxable expenses and benefits provided to employees. HMRC treats it as an annualised charge for the whole tax year rather than a deduction on each payslip;
- Class 1B. Charged at 15% where an employer settles tax on minor, irregular or impracticable expenses and benefits through a PAYE Settlement Agreement. It is paid as part of the PSA, in place of Class 1A on those items.
The legal basis is the Social Security Contributions and Benefits Act 1992. Section 8 sets the main primary percentage at 8% and the additional primary percentage at 2%. Section 9 sets the secondary percentage at 15%.
2026/27 Class 1 thresholds and rates
| Threshold | Weekly | Monthly | Annual |
|---|---|---|---|
| Lower Earnings Limit (LEL) | £129 | £559 | £6,708 |
| Primary Threshold (PT) | £242 | £1,048 | £12,570 |
| Secondary Threshold (ST) | £96 | £417 | £5,000 |
| Upper Earnings Limit (UEL) | £967 | £4,189 | £50,270 |
Employee contributions are 0% below the Primary Threshold, 8% from the Primary Threshold to the Upper Earnings Limit, and 2% above it. Employer contributions are 0% below the Secondary Threshold and 15% above it. Earnings between the Lower Earnings Limit and the Primary Threshold cost the employee nothing but still count towards the State Pension and contributory benefits. For more on what each threshold does, see our guide to the National Insurance threshold.
Recent changes explain why older payslips look different. The employee main rate was 12% until 5 January 2024, 10% from 6 January 2024 and 8% from 6 April 2024. The employer rate rose from 13.8% to 15% on 6 April 2025, when the Secondary Threshold fell from £175 to £96 a week. For 2026/27 the rates are unchanged, and only the Lower Earnings Limit moved, from £125 to £129 a week.
How Class 1 is calculated
Class 1 is not an annual tax in the way income tax is. It is worked out on the earnings for each earnings period, normally the pay period, using the weekly or monthly thresholds. There is no cumulative catch-up across the year. A month with a large bonus pays more at 2% and less at 8% than spreading the same money would, and a month below the threshold wastes the unused part. Each job is also normally assessed on its own, which is why someone with two part-time jobs with different employers can pay no Class 1 at all. Earnings from jobs with the same employer are added together, and in some circumstances so are earnings from different employers.
As an illustration, an employee on £3,000 a month (category A) in 2026/27 pays 8% on £1,952 (£3,000 less £1,048), which is £156.16. The employer pays 15% on £2,583 (£3,000 less £417), which is £387.45.
Directors are the main exception. Their earnings period is normally the tax year, under regulation 8 of the Social Security (Contributions) Regulations 2001, so contributions are worked out on annual earnings however they are paid. Payroll can use the standard annual earnings period method or the alternative method, which deducts on each payment and corrects the position at the year end. The FPS must show which one is used (AN or AL).
Category letters and who pays less
Every employee has a category letter that tells payroll which rates to apply. Most are category A. The main variations are:
- B. Married women and widows with a valid reduced-rate election pay 1.85% instead of 8% between the Primary Threshold and the Upper Earnings Limit;
- C. Employees over State Pension age pay no employee contributions, but the employer still pays 15%;
- M, H and V. Employees under 21, apprentices under 25 and qualifying veterans. The employee pays as normal, but the employer pays 0% up to an upper secondary threshold of £967 a week (£50,270 a year);
- Freeport and investment zone letters. The employer pays 0% up to £481 a week (£25,000 a year) for eligible employees at those special tax sites;
- J and Z. Employees who have deferred because they pay enough Class 1 in another job pay 2% instead of 8%.
The full list is explained in our guide to National Insurance category letters.
What reduces the cost
For employers, the Employment Allowance takes up to £10,500 a year off the secondary Class 1 bill. A company whose only director is also its only employee liable for secondary Class 1 cannot claim it. Our guide to the Employment Allowance covers the conditions.
Employer contributions to a registered pension scheme are not earnings for Class 1, so salary sacrifice into a pension currently saves both employee and employer contributions. That will be limited from 6 April 2029. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 provides for salary sacrificed above £2,000 a year to be liable to Class 1 again, with the detailed rules to be set in regulations. Ordinary employer pension contributions, outside salary sacrifice, stay free of NICs.
Employees stop paying Class 1 when they reach State Pension age. The employer's 15% continues on the same earnings.
Getting Class 1 right
Most Class 1 errors come from a wrong category letter, directors processed on a monthly basis without the annual reconciliation, or payments treated as expenses when they are earnings. HMRC's rates and allowances page carries the current and past thresholds.
Acumon runs Class 1 calculations, category letters and directors' annual reconciliations through its payroll management service. Our employment tax team reviews salary sacrifice and benefit structures ahead of the 2029 change.