How National Insurance works in 2026/27
National Insurance contributions (NICs) are charged on earnings from work, separately from income tax. Employees pay Class 1 through payroll and their employer pays a second, larger share on top. Self-employed people pay Class 4 on their profits through Self Assessment, and Class 2 now only matters for keeping their State Pension record complete. The figures below apply from 6 April 2026 to 5 April 2027 across the whole UK, including Scotland.
Employee Class 1 rates and thresholds
| Earnings | Week | Month | Year | Employee rate |
|---|---|---|---|---|
| Up to the primary threshold | £242 | £1,048 | £12,570 | 0% |
| Primary threshold to upper earnings limit | £242.01 to £967 | £1,048.01 to £4,189 | £12,570 to £50,270 | 8% |
| Above the upper earnings limit | Over £967 | Over £4,189 | Over £50,270 | 2% |
Pay between the lower earnings limit (£129 a week, £559 a month) and the primary threshold costs nothing but still counts towards your State Pension. HMRC's own example: an employee in category A earning £1,000 in a week pays nothing on the first £242, £58 on the next £725 and 66p on the £33 above £967, a total of £58.66.
Employee NI is worked out on each pay period on its own, not on the year as a whole, so the thresholds that apply are the weekly or monthly ones that match how you are paid. Company directors are the exception: they use an annual (or pro rata annual) earnings period.
Employer Class 1
Employers pay 15% on earnings above the secondary threshold of £5,000 a year (£96 a week, £417 a month), with no upper limit. Three groups attract relief: for employees under 21 (category M), apprentices under 25 (category H) and veterans in the first 12 months of their first civilian job after leaving the armed forces (category V), the employer pays 0% up to the upper secondary threshold of £50,270 a year (£967 a week, £4,189 a month) and 15% above it. The employee's own contributions are not affected.
Employees over State Pension age (category C) stop paying employee NI, but the employer still pays 15% on their earnings above the secondary threshold.
Employment Allowance
Eligible employers can reduce their annual employer NI bill by up to £10,500. Since April 2025 there has been no cap on the size of the bill to qualify. You cannot claim if your company's only employee paid above the secondary threshold is its sole director, if more than half your work is in the public sector, or for domestic staff such as nannies, unless they are care or support workers. Only one company in a connected group can claim. The calculator shows employer NI before the allowance, because it is set against the whole payroll rather than one employee.
Worked example
An employee in category A is paid £2,500 a month:
- Employee NI. 8% of £1,452 (£2,500 less the £1,048 primary threshold) = £116.16;
- Employer NI. 15% of £2,083 (£2,500 less the £417 secondary threshold) = £312.45;
- Total cost to the employer. £2,812.45 a month before pension contributions and any Employment Allowance.
If the same employee were 20, the employer would pay nothing, because £2,500 is below the £4,189 monthly upper secondary threshold.
Self-employed: Class 4 and Class 2
Sole traders and partners pay Class 4 at 6% on profits between £12,570 and £50,270 and 2% above that. It is collected with income tax through Self Assessment and is included in payments on account. On £40,000 of profit, Class 4 is £1,645.80.
If your profits are £7,105 or more, Class 2 contributions are treated as paid: you pay nothing and the year still counts towards your State Pension. Below £7,105 you do not have to pay, but you can choose voluntary Class 2 at £3.65 a week to protect your record. You stop paying Class 4 from the start of the tax year after you reach State Pension age.
What this calculator does not cover
- Directors. Directors' NI uses an annual or pro rata earnings period, so a single month's figure can be misleading;
- Special category letters. Freeport and Investment Zone sites, married women's reduced rate (B) and deferment (J and Z) are not modelled;
- Class 1A and 1B. Employers pay 15% on most taxable benefits in kind and PAYE Settlement Agreements;
- Salary sacrifice and pension contributions. Enter pay after any salary sacrifice, because NI is charged on what remains;
- Several jobs. Each job is normally assessed separately, with its own thresholds.
Getting it right
The under-21, apprentice and veteran reliefs only apply if the employee is set up with the right category letter, so it is worth checking when someone joins or has a birthday that changes their category. Our PAYE services and outsourced payroll teams can run payroll for you or review what you already do. To see NI alongside income tax and student loans, use our income tax calculator.