National Insurance is a contribution paid on earnings and self-employed profits. It builds your entitlement to the State Pension and certain benefits. In 2026/27 employees pay 8% on earnings between £12,570 and £50,270 a year and 2% above that. Employers pay 15% on each employee's earnings above £5,000. The self-employed pay 6% on profits between £12,570 and £50,270 and 2% above. People often call it "National Insurance tax", and HMRC collects it alongside income tax, but it is legally a separate charge with its own thresholds, its own rules and its own record of what you have paid.
What National Insurance is for
Paying National Insurance, or being treated as paying it, gives you "qualifying years" on your National Insurance record. Those years decide your State Pension. You need 10 qualifying years to get any new State Pension and 35 for the full rate, currently £241.30 a week, if your record started after April 2016. Class 1 contributions also count towards contribution-based benefits such as New Style Jobseeker's Allowance, contribution-based Employment and Support Allowance, Maternity Allowance and Bereavement Support Payment. Class 4 contributions paid by the self-employed do not count towards any benefit.
Your National Insurance number, two letters, six numbers and a final letter (for example QQ123456B), stays the same for life and links your contributions to your record. It appears on your payslip and P60.
The classes of National Insurance
- Class 1. Paid by employees (primary contributions, deducted through payroll) and employers (secondary contributions) on earnings;
- Class 1A. Paid by employers on taxable benefits such as company cars, and on termination awards over £30,000. The rate is 15%;
- Class 1B. Paid by employers on items in a PAYE Settlement Agreement, at 15%;
- Class 2. Self-employed people with profits of £7,105 or more are treated as having paid it, so nothing is actually due. Those below that level can pay voluntarily at £3.65 a week;
- Class 3. Voluntary contributions of £18.40 a week to fill gaps in your record;
- Class 4. Paid by the self-employed on profits through Self Assessment.
National Insurance rates and thresholds for 2026/27
| Threshold | Weekly | Monthly | Annual |
|---|---|---|---|
| Lower earnings limit | £129 | £559 | £6,708 |
| Secondary threshold (employer) | £96 | £417 | £5,000 |
| Primary threshold (employee) | £242 | £1,048 | £12,570 |
| Upper earnings limit | £967 | £4,189 | £50,270 |
Employees in the standard category A pay nothing on earnings up to £242 a week, 8% between £242 and £967, and 2% above £967. Employees earning between the lower earnings limit (£129) and the primary threshold (£242) pay nothing but are treated as having paid, so the week still counts towards their record. Below £129 a week, nothing counts unless they pay voluntary Class 3. Some category letters carry reduced rates, such as the 1.85% rate for married women and widows holding a valid certificate of election. Our guide to National Insurance category letters covers each one.
Employers pay 15% on earnings above the £5,000 secondary threshold, with no upper limit. They pay 0% up to £50,270 on employees under 21, apprentices under 25 and qualifying veterans, and 0% up to £25,000 for eligible employees at a Freeport or Investment Zone. The rates are set in sections 8, 9 and 15 of the Social Security Contributions and Benefits Act 1992.
How Class 1 is worked out
Class 1 is calculated on each pay period separately, not on annual income. A monthly-paid employee is assessed against the monthly thresholds each month. That is why a large bonus in one month can attract mostly the 2% rate, and why there is no end-of-year "reconciliation" of Class 1 as there is for income tax. Someone with two jobs pays on each job separately, which can mean paying more than the annual figures suggest. HMRC allows deferral in some cases.
As an illustration, on annualised figures, an employee on a salary of £40,000 pays (£40,000 − £12,570) × 8% = £2,194.40 in employee National Insurance. The employer pays (£40,000 − £5,000) × 15% = £5,250 on top. A sole trader with £40,000 of profit pays Class 4 of (£40,000 − £12,570) × 6% = £1,645.80. These are simplified illustrations, not HMRC figures. Actual Class 1 depends on how pay falls across pay periods.
Employers: the Employment Allowance
Most employers can reduce their employer Class 1 bill by the Employment Allowance of £10,500 for 2026/27. Since April 2025 there is no upper limit on the size of employer that can claim. The allowance is claimed through payroll software and set against each payment until it is used up. It cannot be claimed for an employee whose earnings fall within IR35, and a company cannot claim at all if it has a single director who is the only employee liable for employer Class 1. See Employment Allowance for the eligibility detail.
When you stop paying
Employees stop paying Class 1 when they reach State Pension age, although employers continue to pay secondary contributions on their earnings. The self-employed stop paying Class 4 from the 6 April after reaching State Pension age. Gaps in your record from low earnings or time out of work can often be filled with voluntary Class 2 or Class 3 contributions. For time abroad from 6 April 2026, Class 2 can no longer be paid, and Class 3 is available only if you have lived in the UK for 10 years in a row or paid 10 years of qualifying contributions. National Insurance credits are also available in some cases, such as illness or caring.
Current rates are published in HMRC's rates and thresholds for employers 2026 to 2027 and on gov.uk.
Acumon runs Class 1 and Employment Allowance claims through PAYE services and advises on Class 1A, salary sacrifice and director pay through employment tax. If you employ under-21s, apprentices or veterans, check that each one is on the correct category letter. Errors there are common and easy to fix.