National Insurance is the second deduction on almost every UK payslip, and for employers it is often a larger cost than people expect — there is no upper limit on the employer charge. This guide covers Class 1 National Insurance for the 2026/2027 tax year: who pays, the thresholds, the category letters, and the allowance that can remove up to£10,500 from your bill.
Who pays National Insurance?
Class 1 National Insurance is paid by employees and, separately, by their employer. Unlike PAYE there is no single tax code — what someone pays depends on their earnings and their category letter.
- Employees pay once earnings pass the Primary Threshold, £12,570 a year
- Employers pay once earnings pass the Secondary Threshold, £5,000 a year
- Nobody pays below the Lower Earnings Limit of £6,500, but earnings at or above it still build entitlement to the State Pension
That last point matters and is widely missed: someone earning between the Lower Earnings Limit and the Primary Threshold pays nothing, yet the year still counts towards their State Pension record.
National Insurance rates for 2026/2027
| Who | Earnings | Rate |
|---|---|---|
| Employee | Below £12,570 | 0% |
| Employee | £12,570 to £50,270 | 8% |
| Employee | Above £50,270 | 2% |
| Employer | Above £5,000 | 15%, with no upper limit |
The employee rate falls above the Upper Earnings Limit, from 8%to 2%. The employer rate does not — it continues on every pound. On a high salary the employer contribution can exceed the employee’s.
Worked example — £30,000 a year. The employee pays 8%on the amount above £12,570, which is £1,394.40 a year or about £116.20 a month. The employer separately pays 15% on everything above £5,000 — £3,750 a year. The employer’s bill is more than twice the employee’s.
National Insurance is not cumulative
This is the single most common payroll error. PAYE is cumulative: it looks at earnings for the year to date and evens out over twelve months. National Insurance is not. Each pay period is assessed on its own against the monthly or weekly threshold.
The practical consequence is that a one-off bonus can attract more National Insurance than spreading the same money across the year would, because a single large month pushes earnings through the Upper Earnings Limit for that period only. See our guide to bonus taxation for how that plays out.
Category letters
Every employee has a National Insurance category letter that determines which rates apply. Most people are category A.
| Letter | Who it applies to |
|---|---|
| A | The standard rate — most employees |
| B | Married women and widows with a valid reduced-rate election |
| C | Employees over State Pension age — employer pays, employee does not |
| H | Apprentices under 25 |
| M | Employees under 21 |
| V | Veterans in their first year of civilian employment |
Letters H, M and V remove the employer charge up to the Upper Secondary Threshold, so getting the letter right is worth real money on a young or apprentice-heavy payroll.
The Employment Allowance
Eligible employers can reduce their annual employer National Insurance bill by up to £10,500. It is claimed through your payroll software on an Employer Payment Summary, and it comes off the employer charge only — never the employee deduction.
You cannot claim it if the company’s only employee is a director paid above the Secondary Threshold, which excludes many one-person limited companies. Read our Employment Allowance guide for the eligibility rules.
How National Insurance appears on a payslip
The employee deduction must be shown separately from PAYE. The employer contribution is a business cost and does not appear as a deduction, though many employers show it for transparency.
| Description | Amount |
|---|---|
| Gross pay | £2,500.00 |
| PAYE | −£290.35 |
| National Insurance | −£116.20 |
| Net pay | £2,093.45 |
Reporting and paying
National Insurance is reported to HMRC on a Full Payment Submission on or before each payday, and paid together with PAYE. The deadline is the 22nd of the following month if you pay electronically, or the 19th by post. Employers expecting to pay under £1,500 a month can arrange to pay quarterly.
There is no separate registration for National Insurance — registering as an employer for PAYE covers it. See our HMRC PAYE Online guide.
Common National Insurance mistakes
- Treating it like PAYE — it is assessed per pay period, not cumulatively, so it does not even out over the year
- Assuming the employer charge is capped — only the employee rate steps down; the employer pays 15% on all earnings above £5,000
- Leaving everyone on category A — under-21s and apprentices under 25 attract no employer charge up to the Upper Secondary Threshold
- Forgetting the Employment Allowance — up to £10,500 a year, and it must be claimed each tax year
- Missing the pension link — earnings between the Lower Earnings Limit and the Primary Threshold attract no contribution but still build State Pension entitlement
Our free payslip generator works out PAYE, National Insurance and student loan deductions automatically from the salary and tax code, and you can check employer cost with the cost to company calculator.