National Insurance rates for 2025/26: Key updates and changes for small business owners

Published 16 December 2025

Table of contents

• How National Insurance works
• What changed this tax year?
• What employees pay
• What employers pay
• What self-employed people pay
• How National Insurance applies to benefits and PSAs
• How to calculate National Insurance
• Run your payroll and NI in Xero
• FAQs on National Insurance rates

Key takeaways

• If you’re above the age of 16 and below state pension age, you need to make National Insurance contributions (NICs). National Insurance is calculated on pay, profits, benefits, and expenses.
• In the 2025/6 tax year, the employer National Insurance rate increased, the secondary threshold decreased, and the employment allowance rose so that more businesses can reduce their National Insurance bill.
• You can calculate National Insurance yourself, based on weekly or monthly amounts for employees, or use payroll software to automate your calculations and ensure every pay run is accurate.

How National Insurance works

Employers, employees, and self-employed people pay National Insurance (NI). It’s a direct tax, and NI payments contribute to public services like the NHS and the state pension.

You make your National Insurance contributions (NICs) when your income or profits reach a certain threshold. There are different categories and National Insurance rates, depending on things like income, job status, and age.

There are also different National Insurance classes. Here’s a quick explainer:

• Employers pay Class 1a and 1b NI contributions on expenses and benefits they pay to employees.
• Employees make Class 1 NI contributions if they’re below state pension age and earn above £242 per week from one job.
• Self-employed people pay Class 2 or Class 4 NI contributions, depending on their income level (see below).

What changed this tax year?

In 2025, there were three key changes to National Insurance:

• The employer National Insurance rate increased from 13.8% to 15%
• The employer secondary threshold, which is the point when you start paying National Insurance on behalf of employees, decreased from £9100 to £5000 per year
• The employment allowance rose to £10,500, meaning more businesses can access it to reduce their National Insurance bill

What employees pay

Employees make Class 1 National Insurance contributions. As an employer, it’s your job to forward their contributions to HMRC via your payroll.

Employees make contributions if they’re below state pension age, over the age of 16, and earn above £242 a week. If you’re using a modern payroll system, you should be able to set the rates so that correct amounts are deducted automatically from employee payslips.

The different categories of National Insurance are each assigned a letter: A, B, C, D and so on. You can find HMRC’s list of National Insurance letters online. Most people will fall into Category A. The current rate of employee National Insurance for most categories is:

• 8% on amounts between £242.01 and £967 per week
• 2% on any remaining amount over £967 per week

In practice, this means an employee on £1050 per week would pay nothing on the first £242, 8% on £725, and 2% on the remaining £83 per week. The HMRC’s National Insurance calculator can help you work out what needs to be paid.

What employers pay

Employers make Class 1 National Insurance contributions at 15% for most employee categories. The employee’s and employer's National Insurance contributions form the full Class 1 National Insurance submissions. The 15% rate applies to earnings between £96 to £967 per week.

Employers also need to pay Class 1A and 1B National Insurance on expenses and benefits (UK government site) given to employees. This includes things like company cars, or health insurance. You also need to pay Class 1A National Insurance on lump sums (like redundancy payments).

What self-employed people pay

Self-employed National Insurance is calculated on profits. Self-employed people pay Class 2 and Class 4 National Insurance.

A self-employed person with profits above £6845 doesn’t need to pay Class 2 contributions. If profits are below £6845, self-employed people don’t need to pay Class 2 National Insurance, but can make voluntary contributions. The Class 2 National Insurance rate is £3.50 per week for the 2025/26 tax year.

You need to make Class 4 National Insurance contributions if your profits are above £12,570 in a financial year. Self-employed people pay 6% on profits above £12,570 and up to £50,270. Profits above £50,270 are subject to 2% National Insurance.

How National Insurance applies to benefits and PSAs

As an employer, you need to pay Class 1A and 1B National Insurance rates, and Income Tax, on benefits you provide to employees – things like company cars or health insurance. HMRC’s list of employee benefits can help you work out what you need to declare and pay.

A PAYE settlement agreement (PSA) lets employers settle all tax and National Insurance due on minor, irregular, and impractical expenses and benefits (things like relocation expenses, small gifts, or personal care expenses) in a single payment. You need to pay Class 1B National Insurance as part of your PSA instead of Class 1A, which you usually pay at the end of the tax year.

How to calculate National Insurance

Let’s imagine you’re working out how much National Insurance an employee needs to pay. First, look at how much they earn each week – let’s say it’s £1010.

This employee is paid above the weekly primary threshold for the 2025/26 tax year (£242), so they pay 0% on the first £242 and 8% on the remaining £725, taking them up to the upper earnings limit, £967.

They also pay 2% on amounts over £967 – that’s 2% of £43. So the calculation is:

8% of £725 = £58

2% of £43 = £0.86

This amounts to £58.86 National Insurance per week.

Modern payroll software like Xero will apply the correct National Insurance rates for you, so it’s easier to submit the right amounts to HMRC and pay your people fairly.

Run your payroll and NI in Xero

Xero payroll software makes every pay run smooth and simple – it’ll take you less manual effort and time on reporting. Xero automates calculations for pay, pensions, tax rates, and leave, so everyone gets paid the right amounts.

Xero also files Real Time Information (RTI) reports automatically every pay run, so there’s no risk of you forgetting or filing late – Xero takes care of it for you. And Xero is fully based in the cloud, so your data is securely backed up and you can take care of payroll tasks anytime, from anywhere.

WIth the Xero Me app, your employees can do much of their own payroll admin. They can view their payslips, submit timesheets, and upload expenses themselves – saving you all the admin.

Try Xero for free today to get started.

FAQs on National Insurance rates

Here are some common questions on National Insurance.

How much is National Insurance per month?

This depends on whether you employ people, how much you pay them, your profits, and how much you’re paid yourself. As an employer, you’ll probably pay 15% Class 1 National Insurance for most of your employees. Eligible employers can reduce their National Insurance bill by up to £10,500 by claiming employment allowance.

Here’s more info on employment allowances from the government.

How do I calculate NI from a gross salary?

You can use the monthly thresholds to calculate NI from a gross salary. Let’s use the example of an employee on £4,500 per month.

The primary threshold when employees start paying National Insurance is £1,048. The upper earnings limit is £4,189.

So, the employee pays 0% on earnings up to £1,048. They pay 8% on earnings between £1,048 and £4,189 (£3,141), and 2% on earnings above £4,189 (£311)

8% of £3,141 = £251.28

2% of £311 = £6.22

Which amounts to £257.50 National Insurance per month.

Do company directors pay NI differently?

Yes, National Insurance for company directors is different. While directors are classed as employees and pay National Insurance on income, this is calculated on annual earnings rather than weekly or monthly pay periods.

If a director is paid irregularly, work out the National Insurance for their total pay in the tax year so far (including bonuses) the next time you pay them , and subtract the total National Insurance they’ve paid so far to see what their contributions need to be.

For directors who are paid regularly, calculate the National Insurance for each pay period, including bonuses. At the end of the tax year you can use payroll software to work out whether any extra National Insurance is due.

Do I pay Class 2 and Class 4 if I am self-employed?

No. Class 2 National Insurance is no longer mandatory, although you can choose to pay it if your profits are below the £6,845 National Insurance threshold. For profits above this amount, HMRC treats Class 2 contributions as having been paid, and for profits above £12,570, you need to make Class 4 contributions.

What if I receive both PAYE and self-employed income?

If you’re both employed and self-employed, your employer will make Class 1 National Insurance contributions on your wages, and you may need to make Class 4 National Insurance contributions on your self-employed income. How much you pay depends on how much you earn from employment and self-employment, and HMRC will tell you how much National Insurance you owe on your self-assessment return.