National Insurance Contributions UK 2026/27: Employee, Employer & Self-Employed Rates Quick answer
National Insurance Contributions, often called NICs, are payments made by employees, employers and self-employed workers in the UK.
They help determine entitlement to certain state benefits, including the State Pension, and are a key payroll cost for employers.
For the 2026/27 tax year, most employees pay Class 1 National Insurance through PAYE at:
Class 1 employee NIC rate
Below the primary threshold
0%
Between the primary threshold and upper earnings limit
8%
Above the upper earnings limit
2%
Employers also pay employer National Insurance on qualifying employee earnings, with rates depending on the employee’s National Insurance category letter.
Self-employed workers usually pay Class 4 National Insurance through Self Assessment if their profits are above the relevant threshold.
For businesses, National Insurance matters because it affects:
payroll costs
employee payslips
PAYE calculations
employer contributions
director payroll
payroll budgeting
pension and benefits planning
compliance with HMRC
outsourced payroll costs
If you employ staff, payroll software or a payroll provider should calculate employee and employer NICs correctly each pay period.
Compare payroll service quotes if you need help with PAYE, National Insurance, pensions, payslips, RTI submissions or payroll compliance.
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Contents
What Are National Insurance Contributions?
Current UK National Insurance Rates
Why Are National Insurance Contributions Important?
How to Pay National Insurance Contributions
Keeping Track of Your National Insurance Record
How do we work?
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Authored by: Ally Cox (Business Technology & B2B Services Specialist 10+ Years’ Experience)
Reviewed by: James Ward (Telecoms Specialist, 12+ Years Experience)
Last Updated: July 2026
Key Takeaways
National Insurance Contributions are paid by employees, employers and self-employed workers.
Employees usually pay Class 1 NICs through PAYE.
Employers pay employer National Insurance on qualifying employee earnings.
Self-employed workers usually pay Class 4 NICs through Self Assessment.
National Insurance is separate from Income Tax, although both are often handled through payroll.
NICs can affect entitlement to the State Pension and certain contributory benefits.
Employers must calculate deductions correctly and report payroll information to HMRC.
Payroll software or outsourced payroll providers can help calculate National Insurance each pay period.
Employer National Insurance can be a major payroll cost, especially for growing teams.
The page should be checked each tax year because thresholds and rates can change.
Compare payroll providers if National Insurance, PAYE, pensions or payroll compliance is taking too much time.
What Are National Insurance Contributions? National Insurance Contributions are UK payments linked to employment, self-employment and certain state benefit entitlements.
Different people pay different classes of National Insurance depending on their work status.
Person or organisation
Main NI class
Employees
Class 1 employee National Insurance
Employers
Class 1 secondary employer National Insurance
Employers on some benefits and expenses
Self-employed workers
Class 4 National Insurance
People filling gaps in their record
Class 3 voluntary National Insurance
For employees, National Insurance is usually deducted automatically through PAYE.
For employers, National Insurance is an additional payroll cost on top of wages.
For self-employed workers, National Insurance is usually calculated through Self Assessment.
Current UK National Insurance rates 2026/27 National Insurance rates and thresholds can change each tax year, so always check the latest HMRC guidance before making payroll decisions.
Employee National Insurance, Class 1
Most employees pay Class 1 National Insurance through PAYE.
Your employer deducts employee National Insurance from your wages before you are paid.
Earnings band
Below the primary threshold
0%
Between the primary threshold and upper earnings limit
8%
Above the upper earnings limit
2%
Employer National Insurance
Employers pay employer National Insurance separately from the amount deducted from employee wages.
The exact employer rate can depend on the employee’s National Insurance category letter.
Employer NICs matter because they increase the real cost of employing staff.
For example, if an employee earns more than the relevant employer threshold, the business may need to pay employer National Insurance on qualifying earnings.
Self-employed National Insurance
Self-employed workers usually pay Class 4 National Insurance through Self Assessment if profits are above the relevant threshold.
Class 4 rates are separate from employee and employer Class 1 National Insurance.
Voluntary National Insurance, Class 3
Class 3 voluntary contributions can sometimes be paid to fill gaps in a National Insurance record.
This may help protect entitlement to the State Pension, but you should check your record and guidance before paying voluntarily.
National Insurance classes explained
NI class Who pays it?
Class 1 employee
Employees
Class 1 employer
Employers
Class 1A
Employers on certain expenses or benefits
Reported and paid separately
Class 1B
Employers with PAYE Settlement Agreements
Class 3
Voluntary contributors
Paid voluntarily to fill record gaps
Class 4
Self-employed workers
Paid through Self Assessment
Why National Insurance matters for employers National Insurance is not just an employee deduction -it is also a business cost.
If you employ staff, you may need to:
deduct employee National Insurance through PAYE
calculate employer National Insurance
report payroll information to HMRC
include National Insurance on payslips
budget for employer contributions
apply the correct NI category letter
handle directors’ National Insurance correctly
process starters and leavers
manage benefits and expenses where relevant
keep payroll records
correct mistakes quickly
This is one reason many growing businesses use payroll software, managed payroll or outsourced payroll services.
Example: why employer National Insurance affects payroll cost When a business hires an employee, the real cost is not just salary, and a business may need to budget for:
gross salary
employer National Insurance
employer pension contributions
payroll processing
holiday pay
benefits
HR admin
insurance
training
software
recruitment costs
For example, a £30,000 salary does not mean the employee only costs the business £30,000.
Employer National Insurance and pension contributions can increase the total employment cost.
This is why payroll quotes and employment cost calculations should include employer NICs, not just employee take-home pay.
Why Are National Insurance Contributions Important?
To access a state pension
Your NICs contribute towards your eligibility for the State Pension, and typically, you need 35 qualifying years of contributions to receive the full State Pension.
You need them for access to benefits
NICs also help you qualify for various state benefits, including:
Maternity allowance Employment and Support Allowance (ESA) Jobseeker’s Allowance (JSA) Bereavement benefits
For the health and social care levy
From April 2022, a new Health and Social Care Levy has been introduced and is funded by NI contributions.
How to Pay National Insurance Contributions If you are employed
If you are employed, your employer usually deducts Class 1 employee National Insurance through PAYE.
You can see the deduction on your payslip.
If you are an employer If you employ staff, you usually calculate and pay National Insurance through payroll, which includes:
employee National Insurance deductions
employer National Insurance contributions
PAYE reporting
RTI submissions
payslips
payroll records
Most employers use payroll software, an accountant, a payroll bureau or an outsourced payroll provider.
If you are self-employed
If you are self-employed, your National Insurance is usually calculated through Self Assessment.
Class 4 National Insurance may apply if your profits are above the relevant threshold.
If you have gaps in your record
You may be able to pay voluntary Class 3 National Insurance contributions to fill gaps in your record.
Check your National Insurance record before deciding.
Keeping Track of Your National Insurance Record It’s good to remember that you can check your National Insurance record online through your personal tax account on the HMRC website. This allows you to:
See how much NICs you have paid Check if there are any gaps in your record Verify your eligibility for the State Pension
Filling Gaps in Your NICs Record
If there are gaps in your record, you can make voluntary Class 3 contributions to fill them, which can be particularly beneficial if you’re close to the number of years needed for a full State Pension.
National Insurance and payroll services A payroll provider can help UK businesses calculate and manage National Insurance correctly.
Payroll services can support:
PAYE deductions
employee NIC calculations
employer NIC calculations
RTI submissions
payslips
pension contributions
payroll reports
P45s and P60s
directors’ payroll
starters and leavers
statutory payments
payroll corrections
HMRC compliance
This can be especially useful if your business has:
weekly payroll
multiple pay frequencies
hourly workers
overtime
bonuses
directors
pensions
CIS subcontractors
high staff turnover
multiple sites
limited payroll experience
Compare payroll providers if National Insurance is becoming difficult to manage in-house.
National Insurance vs Income Tax: What’s the Difference?
Area National Insurance Income Tax
What it is based on
Employment status and earnings/profits
Taxable income
Paid by employees
Yes
Yes
Paid by employers
Yes, employer NICs
Paid by self-employed workers
Yes, usually Class 4
Yes
Linked to State Pension record
Yes
No
Collected through PAYE
Yes, for employees
Collected through Self Assessment
Yes, for self-employed
Shown on payslip
Usually yes
Usually yes
What should employers check each tax year? Before running payroll in a new tax year, employers should check:
National Insurance rates
employee thresholds
employer thresholds
category letters
Employment Allowance eligibility
pension thresholds
tax codes
payroll software updates
RTI submission settings
director payroll settings
benefits and expenses reporting
statutory payment rates
student loan and postgraduate loan settings
If your payroll provider or software is not updated correctly, National Insurance calculations may be wrong.
Frequently Asked Questions (FAQs) What is National Insurance?
National Insurance is a UK contribution system linked to employment, self-employment and certain state benefit entitlements. Employees, employers and self-employed workers may all pay National Insurance.
How much National Insurance do employees pay in 2026/27?
For 2026/27, most employees pay Class 1 National Insurance at 8% between the primary threshold and upper earnings limit, then 2% above the upper earnings limit.
Do employers pay National Insurance?
Yes. Employers pay employer National Insurance on qualifying employee earnings. This is separate from the employee National Insurance deducted from wages.
What is employer National Insurance?
Employer National Insurance is the contribution a business pays as an employer. It is an additional payroll cost on top of salary and employee deductions.
Do self-employed people pay National Insurance?
Yes, self-employed workers usually pay Class 4 National Insurance through Self Assessment if their profits are above the relevant threshold.
What happened to Class 2 National Insurance?
Class 2 National Insurance rules changed from April 2024. Many self-employed people no longer need to pay Class 2 NICs, but credits and voluntary payment rules may still matter depending on profits and circumstances.
What is Class 3 National Insurance?
Class 3 National Insurance is a voluntary contribution that can sometimes be paid to fill gaps in your National Insurance record.
Is National Insurance the same as Income Tax?
No. National Insurance and Income Tax are separate. They are both often handled through payroll, but they are calculated differently.
Does National Insurance affect State Pension?
Yes. National Insurance contributions and credits can affect qualifying years for the State Pension.
How many qualifying years do I need for the full new State Pension?
Many people need 35 qualifying years for the full new State Pension, but your individual record can vary. Check your State Pension forecast and National Insurance record.
How do I check my National Insurance record?
You can check your National Insurance record through your HMRC personal tax account or GOV.UK.
Can employers reduce National Insurance costs?
Some eligible employers may be able to claim Employment Allowance, which can reduce employer National Insurance. Eligibility rules apply.
Do directors pay National Insurance?
Company directors can pay National Insurance, but director payroll can be calculated differently. Businesses should use payroll software or specialist payroll support.
What happens if payroll calculates National Insurance incorrectly?
Incorrect National Insurance can lead to wrong payslips, employee disputes, HMRC corrections and extra admin. Employers should correct errors as soon as possible.
Can payroll software calculate National Insurance?
Yes. Payroll software should calculate National Insurance based on employee pay, thresholds, category letters and payroll rules.
Should I outsource payroll if National Insurance is confusing?
If payroll is becoming difficult, outsourcing can help. A payroll provider can calculate National Insurance, PAYE, pensions, payslips and RTI submissions for your business.
Final Thoughts National Insurance Contributions are a core part of the UK tax system, affecting employees, employers and the self-employed alike.
So understanding:
Which class you pay
Current rates
How contributions affect your State Pension
Your employer responsibilities
…can prevent costly mistakes and protect your long-term financial security, so for small business owners, accurate payroll software and regular compliance checks are essential to avoid penalties and overpayments!.
Compare payroll providers for National Insurance support Need help calculating National Insurance correctly?
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total monthly cost
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Hi, I’m Ally Cox , a senior copywriter and blogger at CompareYourBusinessCosts.co.uk, the UK’s trusted platform for comparing business services.over a decade of experience in the B2B sector, I specialise in simplifying complex topics like leased lines, VoIP, business energy, HR and payroll solutions, accounting software, and EPOS systems .HR, copywriting, and business operations- from clocking-in systems to card machines and office technology .informed, confident decisions when choosing products and services that improve efficiency and save money.
