National Insurance Rates 2026/27 Explained

Employee NI: rates and thresholds in 2026/27

Employee National Insurance contributions are calculated separately from income tax and use different thresholds. For 2026/27, employee NI starts at the Primary Threshold, which is aligned to the personal allowance at £12,570 per year (£1,047.50/month). Below this, no employee NI is owed. Between £12,570 and the Upper Earnings Limit of £50,270 per year, the rate is 8%. Above £50,270, NI drops to 2%.

The 2% rate above £50,270 is why the combined marginal rate (income tax plus NI) at earnings over the higher rate threshold is 42%, not 48%. Income tax rises to 40% at £50,270, but NI simultaneously drops from 8% to 2%, so the net effect is a 14 percentage point income tax increase offset by a 6 percentage point NI decrease. Knowing this is useful when evaluating pay rises near the threshold.

NI is calculated per pay period in a non-cumulative way for employees. This is different from income tax, which is cumulative across the year. A month with unusually high earnings (from a bonus, for example) can therefore result in higher NI than would be implied by the annual equivalent, and any over-deduction does not automatically refund the way income tax does.

• Employee NI: 0% below £12,570, 8% to £50,270, 2% above £50,270.
• NI is calculated per pay period, not cumulated across the year.
• At £50,270 threshold: income tax increases to 40%, NI drops to 2% (net marginal: 42%).
• NI does not apply to pension salary sacrifice contributions.

Employer NI: the 15% rate and the secondary threshold

Employers pay their own separate National Insurance on employee wages at a rate of 15% on earnings above the Secondary Threshold of £5,000 per year from April 2025. This rate increased from 13.8% in April 2025, a significant change for businesses with large workforces. Note that the Secondary Threshold was also significantly reduced from £9,100 to £5,000 at the same time, widening the base as well as increasing the rate.

Employer NI is a real cost of employment that employees rarely see directly, but it substantially increases the total cost of employing someone above their headline salary. On a £35,000 salary, employer NI is approximately 15% × (£35,000 − £5,000) = £4,500 per year. That is the cost the employer pays on top of your salary and their pension contribution, relevant context when evaluating total employment package discussions.

The Employment Allowance allows eligible employers to offset up to £10,500 of their employer NI liability per year from 2026/27. Most small businesses qualify, but companies where the sole director is the only employee do not. This is one reason small employer NI planning often shapes decisions around timing of salary increases and pension structures.

• Employer NI rate: 15% on earnings above £5,000/year secondary threshold.
• On a £35,000 salary: employer NI ~£4,500/year on top of gross wages.
• Employment Allowance: up to £10,500 offset per year for qualifying employers.
• Single-director companies (no other employees) do not qualify for the allowance.

NI categories: not everyone pays the same rate

Standard employee NI (category A) applies to most workers. But several other categories apply in specific situations and use different rates. Category B applies to married women who elected for the reduced rate before 1977, very few people still hold this status. Category C exempts employees over state pension age from paying employee NI (though employer NI still applies). Category H applies to apprentices under 25 (employers pay 0% up to the Upper Secondary Threshold).

Category M is for employees under 21, again, a zero employer NI rate up to the Upper Secondary Threshold. Category Z applies to apprentices under 25 with employer NI at 0% up to the threshold. These reduced employer NI categories matter because they affect the total cost of specific hires, and some employers will factor them into graduate or apprenticeship hiring decisions.

For most PAYE employees, category A is the only one that matters in practice. If your payslip shows a different NI category and you are not in one of the specific groups above, it is worth checking with your payroll department, incorrect NI categories are one of the more common payroll mistakes and can result in underpayment penalties.

• Category A: standard employee NI, applies to most workers.
• Category C: employees over state pension age, no employee NI.
• Categories H and M: zero employer NI for apprentices and under-21s up to the threshold.
• Check your payslip NI category if anything looks unusual.