National Insurance contributions: what you pay and how to manage it

Published Friday 15 May 2026

National Insurance contributions: what you pay and how to manage it

Learn how National Insurance works, what rates apply in 2025/26, and how to stay compliant as a UK employer.

Written by Jotika Teli

Table of contents

• What are National Insurance contributions?
• Who pays National Insurance contributions?
• National Insurance rates and thresholds
• National Insurance classes explained
• Employee National Insurance contributions
• Employer National Insurance contributions
• National Insurance credits and voluntary contributions
• How to file National Insurance contributions with HMRC
• What is the National Insurance Employment Allowance scheme?
• Simplify National Insurance with Xero
• FAQs on National Insurance contributions

Key takeaways

• Employee National Insurance rates for 2025/26. You pay 8% on earnings between £12,570 and £50,270, and 2% on anything above £50,270.
• Employer costs increased from April 2025. The employer rate rose to 15%, and the secondary threshold dropped to £5,000, meaning you pay National Insurance on more of each employee's earnings.
• Employment Allowance more than doubled. Eligible employers can now reduce their National Insurance bill by up to £10,500 per year, up from £5,000 previously.
• Filing deadlines matter. You must submit Full Payment Submissions (FPS) to HMRC each pay run and pay employer National Insurance by the 22nd of the following month.

What are National Insurance contributions?

National Insurance contributions (NICs) are payments you make from your earnings to fund state benefits such as the State Pension and unemployment support. They're collected by HM Revenue and Customs (HMRC) alongside income tax.

You start paying NICs once your earnings pass a set threshold. For the 2025/26 tax year, that threshold is £12,570 for employees and self-employed people. You pay from age 16 until you reach State Pension age.

Three main groups contribute to National Insurance:

• Employees. Pay through payroll deductions on their salary or wages.
• Employers. Pay a separate contribution on each employee's earnings.
• Self-employed people. Pay through their Self Assessment tax return based on profits. You can learn more about self-employed tax thresholds to see how these apply to your situation.

Who pays National Insurance contributions?

The type of National Insurance you pay depends on how you earn your income. Each group pays under a different class with its own rates and rules.

Employees, employers, and self-employed people all contribute, but in different ways:

• Employees. Pay Class 1 NICs, deducted automatically from salary or wages through payroll.
• Employers. Pay Class 1 secondary NICs on each employee's earnings above the secondary threshold. This is a separate cost on top of the employee's own contribution.
• Self-employed people. Pay Class 4 NICs on profits through Self Assessment. Since April 2024, Class 2 contributions are no longer required for those earning above the small profits threshold. Find out more in the guide to self-employed National Insurance.

National Insurance rates and thresholds

Rates and thresholds change each tax year. Staying up to date helps you budget accurately and avoid underpayments.

Here are the main National Insurance rates for 2025/26:

• Employee (Class 1). 8% on earnings between £12,570 and £50,270, then 2% on earnings above £50,270.
• Employer (Class 1 secondary). 15% on earnings above £5,000 (the secondary threshold, reduced from £9,100 in April 2025).
• Self-employed (Class 4). 6% on profits between £12,570 and £50,270, then 2% on profits above £50,270.
• Class 2. No longer required for self-employed people earning above the small profits threshold since April 2024.
• Class 3 voluntary. £17.75 per week for 2025/26.

You can check the full list of NI category letters and rates on GOV.UK.

Worked example: National Insurance on a £30,000 salary

Here's how NICs break down for an employee earning £30,000 per year in 2025/26.

Employee contribution:

• Taxable earnings: £30,000 minus £12,570 = £17,430
• NI rate: 8%
• Annual employee NI: £17,430 x 8% = £1,394.40

Employer contribution:

• Taxable earnings: £30,000 minus £5,000 = £25,000
• NI rate: 15%
• Annual employer NI: £25,000 x 15% = £3,750

On a £30,000 salary, the total National Insurance cost is £5,144.40 per year, split between the employee (£1,394.40) and the employer (£3,750).

National Insurance classes explained

National Insurance is split into several classes. Each one applies to a different group of people or type of income.

• Class 1. Paid by employees (primary) and employers (secondary) on salary and wages. This is the most common class and is collected through payroll.
• Class 2. Previously a flat-rate contribution for self-employed people. Since April 2024, it's no longer required if your profits are above the small profits threshold. You can still pay voluntarily to protect your State Pension record.
• Class 3. Voluntary contributions you can make to fill gaps in your National Insurance record. The rate is £17.75 per week for 2025/26.
• Class 4. Paid by self-employed people on profits through Self Assessment. Rates are 6% on profits between £12,570 and £50,270, and 2% above that.
• Class 1A. Paid by employers on benefits in kind provided to employees, such as company cars or private medical insurance. Due annually by 22 July following the end of the tax year.
• Class 1B. Paid by employers who have a PAYE Settlement Agreement (PSA) with HMRC. It covers NICs on minor or irregular benefits included in the agreement.

Employee National Insurance contributions

As an employer, you're responsible for deducting the correct amount of National Insurance from your employees' pay each pay period. These deductions happen automatically through payroll.

Employees pay NICs on earnings above the primary threshold of £12,570 per year. The rates for 2025/26 are:

• 8% on earnings between £12,570 and £50,270 (the upper earnings limit)
• 2% on earnings above £50,270

Directors follow different rules. Their NICs are usually calculated on an annual earnings period rather than weekly or monthly. This means their contributions are worked out based on total pay for the year, which can affect the timing of deductions.

Worked example: employee NI on a £30,000 salary

For an employee earning £30,000 per year:

• Earnings subject to NI: £30,000 minus £12,570 = £17,430
• Employee NI: £17,430 x 8% = £1,394.40 per year
• That's roughly £116.20 per month deducted from their pay

You can check your payroll calculations manually using HMRC's tools to make sure deductions are accurate.

Employer National Insurance contributions

You pay employer NICs on top of each employee's salary. This is a direct cost to your business and doesn't come out of the employee's pay.

From April 2025, the employer rate is 15% on earnings above the £5,000 secondary threshold. That's a significant change from the previous rate of 13.8% on earnings above £9,100.

Some employees attract reduced or zero employer NICs:

• Under-21s. No employer NICs on earnings up to £50,270.
• Apprentices under 25. No employer NICs on earnings up to £50,270.
• Armed forces veterans. No employer NICs on earnings up to £50,270 for the first 12 months of civilian employment.
• Freeport employees. Reduced rates apply in designated freeport areas.

You also pay Class 1A NICs at 15% on benefits in kind you provide to employees. Common examples include company cars, private healthcare, and gym memberships. Termination payments above £30,000 also attract employer NICs.

Worked example: employer NI on a £30,000 salary

For an employee earning £30,000 per year:

• Earnings subject to NI: £30,000 minus £5,000 = £25,000
• Employer NI: £25,000 x 15% = £3,750 per year
• That's £312.50 per month as an additional cost to your business

National Insurance credits and voluntary contributions

National Insurance credits protect your State Pension record during periods when you're not paying NICs through employment or self-employment. They count towards the qualifying years you need for a State Pension.

You may receive NI credits automatically if you're claiming certain benefits:

• Universal Credit. Credits are applied when your earnings are below the lower earnings limit.
• Jobseeker's Allowance. Credits cover periods of unemployment while you're actively looking for work.
• Carer's Allowance. Credits apply when you're caring for someone at least 35 hours a week.
• Child Benefit. A parent or carer of a child under 12 receives credits even if they don't claim the payment itself.

You need at least 10 qualifying years of National Insurance to get any State Pension, and 35 qualifying years for the full amount. If you have gaps in your record, you can make voluntary Class 3 contributions at £17.75 per week for 2025/26.

You can check your National Insurance record on GOV.UK to see whether you have any gaps and how they might affect your State Pension.

How to file National Insurance contributions with HMRC

You report and pay employer National Insurance through the Pay As You Earn (PAYE) system. This involves submitting payroll information to HMRC each time you pay your employees.

Here's how the process works:

1. Run your payroll and calculate each employee's pay, tax, and NICs.
2. Submit a Full Payment Submission (FPS) to HMRC on or before each payday.
3. Pay the total NICs and income tax to HMRC by the 22nd of the following month (or the 19th if paying by cheque).

You can pay HMRC using several methods:

• Bank transfer. The fastest option, with same-day or next-day processing.
• Direct debit. Set up a regular payment so you don't miss deadlines.
• Cheque. Allow extra time as HMRC needs to receive it by the 19th of the month.

If you miss the deadline, HMRC may charge interest and penalties. Using payroll software can help you stay on top of submissions and deadlines. For a broader overview of the system, see the guide to what PAYE is and how it works.

What is the National Insurance Employment Allowance scheme?

The Employment Allowance lets eligible employers reduce their National Insurance liability each tax year. From April 2025, the allowance increased to £10,500, more than double the previous £5,000 limit.

The scheme also became more accessible. The previous eligibility cap of £100,000 in employer NICs has been removed, meaning more businesses can now claim.

Here's what you need to know:

• Claim amount. Up to £10,500 off your employer Class 1 NICs per tax year.
• One claim per scheme. You can only claim once per PAYE scheme, not per employee.
• Exclusions. The allowance doesn't apply to deemed payments under IR35 off-payroll working rules.
• How to claim. You claim through your payroll software at the start of the tax year. The allowance reduces your monthly payments to HMRC until it's used up.

Learn more about how the Employment Allowance works and whether your business qualifies.

Simplify National Insurance with Xero

Keeping up with National Insurance rate changes and filing deadlines is essential for staying compliant. Getting it wrong can lead to penalties from HMRC or overpaying without realising.

Xero automates National Insurance calculations for every pay run. It applies the correct rates and thresholds, generates your FPS, and submits it directly to HMRC. You can track employer NICs alongside other payroll costs in real time, so there are no surprises.

Ready to streamline your payroll? get one month free and see how Xero Payroll handles National Insurance for you.

FAQs on National Insurance contributions

Here are answers to common questions about National Insurance that aren't fully covered above.

How much National Insurance do I pay?

The amount depends on your employment status and earnings. Employees pay 8% on earnings between £12,570 and £50,270 for 2025/26. You can use HMRC's online calculators to work out your exact contribution based on your pay frequency and NI category letter.

Do I pay National Insurance after State Pension age?

No, you stop paying employee National Insurance once you reach State Pension age, even if you keep working. Your employer still pays their share of NICs on your earnings above the secondary threshold.

How do I check my National Insurance record?

You can view your record through your personal tax account on GOV.UK. It shows how many qualifying years you have and highlights any gaps. Gaps can reduce the State Pension you receive, so it's worth checking regularly.

What happens if I don't pay enough National Insurance?

Gaps in your National Insurance record can lower your State Pension entitlement. You may be able to fill gaps by making voluntary Class 3 contributions, currently £17.75 per week. HMRC can tell you which years are eligible to top up and the deadline for doing so.

Can I get a refund on National Insurance?

You can claim a refund if you've overpaid, for example by paying through two jobs that together pushed you over the upper earnings limit. Contact HMRC with your payroll details and they'll review your record. Refunds are usually processed within a few weeks.

Is employer National Insurance changing in 2025?

Yes, from 6 April 2025 the employer rate increased from 13.8% to 15%. The secondary threshold also dropped from £9,100 to £5,000, which means employer NICs apply to a larger portion of each employee's pay. The Employment Allowance increase to £10,500 helps offset some of this additional cost.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.