Definition
National Insurance contributions (NICs) are payments made by UK employees, employers and the self-employed that build entitlement to the State Pension and certain benefits. Employers deduct employees' Class 1 contributions through PAYE and also pay their own contributions on earnings above the secondary threshold.
Classes of National Insurance
The class you pay depends on employment status and earnings. Class 1 is paid by employees under State Pension age who earn above the primary threshold, and employers deduct it automatically from wages. Employers also pay their own secondary Class 1 contributions. Class 1A and Class 1B are paid only by employers, on employees' expenses and benefits and on PAYE Settlement Agreements.
Self-employed people pay Class 4 on profits above £12,570 a year, and once profits reach £7,105, Class 2 is treated as paid to protect their record. Class 3 is voluntary and fills gaps in a person's record. People start paying at 16, and employees stop paying Class 1 when they reach State Pension age.
Employer National Insurance raises the cost of each hire, which is a good reason to shortlist with care. springhire puts resume scoring, skills tests and video interviews behind one link with its candidate screening software.
Rates and thresholds for 2026 to 2027
For the tax year from 6 April 2026 to 5 April 2027, most employees (category A) pay 8% on earnings between the primary threshold of £242 a week (£1,048 a month) and the upper earnings limit of £967 a week (£4,189 a month), and 2% above that. Earnings between the lower earnings limit of £129 a week and the primary threshold attract no employee contribution, but the employee can still qualify for the State Pension and certain benefits.
Employers pay 15% on earnings above the secondary threshold of £96 a week (£417 a month, £5,000 a year). Class 1A and Class 1B are also 15%. Eligible employers can claim the Employment Allowance, worth up to £10,500 a year off their employer bill.
How to calculate National Insurance on a salary
Employee NIC equals earnings between the primary threshold and the upper earnings limit times 8%, plus 2% of anything above the limit. Employer NIC equals earnings above the secondary threshold times 15%. Take an employee paid £3,000 in one month of 2026 to 2027. The employee pays £3,000 minus £1,048, which is £1,952, times 8%: £156.16. The employer pays £3,000 minus £417, which is £2,583, times 15%: £387.45. Payroll software applies the thresholds per pay period, so someone with uneven pay can pay different amounts each month.
Employer responsibilities
Employers run PAYE, deduct employee contributions before paying wages, show them on the payslip and pay both shares to HMRC. Common mistakes include using the wrong category letter, applying last year's thresholds after 6 April, and forgetting that the employer threshold is much lower than the employee threshold, so employer contributions start on smaller earnings.
Official sources
Rules and rates change. Check the official source before you act on them.
Frequently asked questions
National Insurance contributions build a person's entitlement to the State Pension and certain state benefits. Employees pay Class 1 through payroll, employers pay their own contributions on top, and the self-employed pay Class 4 on profits. Gaps in a record can be filled with voluntary Class 3 contributions.
Employers pay secondary Class 1 contributions at 15% on each employee's earnings above the secondary threshold of £5,000 a year (£96 a week). Class 1A and Class 1B are also charged at 15%. Eligible employers can reduce their bill with the Employment Allowance of up to £10,500.
Employees stop paying Class 1 National Insurance when they reach State Pension age. Self-employed people stop paying Class 4 from the 6 April after they reach State Pension age. People start paying from age 16 once their earnings or profits are above the relevant threshold.
Related terms
Part of the springhire HR glossary.
