National Insurance explained

The UK’s second income tax: what employees pay, what employers pay on top, and why NI behaves differently from income tax.

Employee NI in 2026/27

Employees pay Class 1 National Insurance at 8 percent on earnings between £12,570 and £50,270 a year, and 2 percent on everything above. Unlike income tax it applies per pay period rather than cumulatively, and only to earned income – pensions, savings interest and rent escape it entirely. NI contributions also build your entitlement to the State Pension and certain benefits; you generally need 35 qualifying years for the full pension. NI is not devolved, so the same rates apply in Scotland.

Employer NI: the hidden 15 percent

Employers pay secondary Class 1 NI at 15 percent on each employee’s earnings above just £5,000 a year – a threshold cut sharply in April 2025. It never appears on your payslip, but it is one of the biggest costs of employment: £4,500 on a £35,000 salary. Hiring under-21s and apprentices under 25 attracts no employer NI up to £50,270, which makes younger workers materially cheaper to employ.

The Employment Allowance

Most employers can claim the Employment Allowance, wiping out the first £10,500 of their employer NI bill each year – enough to cover roughly two full-time employees on the National Living Wage. It is claimed through the payroll EPS submission, not paid as cash.

Salary sacrifice

Because NI is charged on cash pay, swapping salary for employer pension contributions saves 8 percent for the employee and 15 percent for the employer. It is the main reason salary sacrifice pensions have become the default at larger firms – the pensions guide covers the trade-offs.

Run your own numbers in the National Insurance calculator, or see NI in context with the take-home pay calculator and employer cost calculator.