National Insurance is a form of tax that is compulsory for most working individuals in the UK. It is paid by both employees and employers, with different rates and thresholds applying depending on employment status and earnings.
Employees pay Class 1 National Insurance contributions (NICs). Employers pay secondary Class 1 NICs on their employees’ earnings.
To pay National Insurance, you need a National Insurance number. These are issued by His Majesty’s Revenue and Customs (HMRC) just before you turn 16.
This number ensures that your contributions are recorded correctly and helps maintain your National Insurance record. The record is vital for claiming benefits like the State Pension and Jobseeker’s Allowance.
National Insurance Classes
There are different National Insurance classes depending on your employment status.
Employees typically pay Class 1 National Insurance contributions (NICs), while employers pay secondary Class 1 NICs on their employees’ earnings.
Self-employed people pay Class 2 and Class 4 National Insurance contributions.
Class 3 contributions are voluntary. They are paid by people wishing to fill gaps in their National Insurance records.
This article focuses specifically on Class 1 National Insurance.
NI Rates and Thresholds for 2025/26
National Insurance for employees is calculated based on earnings between certain thresholds. These thresholds determine when NICs start being deducted and at what rate.
Here is a summary of the key earnings thresholds for the 2025/26 tax year.
| Threshold | Weekly | Monthly | Annual |
|---|---|---|---|
| Lower Earnings Limit | £125 | £542 | £6,500 |
| Primary Threshold | £242 | £1,048 | £12,570 |
| Upper Earnings Limit | £967 | £4,189 | £50,270 |
- Lower Earnings Limit (LEL): If your earnings are below this limit, you do not pay NIC. However, you do not receive any credit toward benefits. If you earn above this limit, you are treated as if you paid NIC (you get the benefits credit) even if earnings are below the Primary Threshold. The LEL is increased every year to keep pace with inflation.
- Primary Threshold (PT): The earnings level above which employees start paying Class 1 NICs. If your earnings are above the PT, you pay the main NIC rate on the portion of earnings above this threshold. The main NIC rate in 2025/26 is 8%.
- Upper Earnings Limit (UEL): This is the upper band for the standard NIC rate. Earnings above the UEL are still liable for NIC but at a much lower additional rate. It marks when an employee’s NIC rate changes to the additional rate. The additional rate in the 2025/26 tax year is 2%.
Thresholds and rates for 2024/25 can be found here.
Calculation Period
National Insurance is calculated and deducted per pay period, whereas income tax uses a cumulative annual calculation to ensure the correct amount is paid over the tax year.
National Insurance Categories
Different categories or letters determine how Class 1 NICs are calculated.
Most employees fall into the standard category, which is category A. This category is used for employees who are not covered by any special rules.
Other categories exist for specific groups, such as those over State Pension age. This article refers to the rules and rates that apply to category A.
Information about other categories can be found here. The rates applicable to these categories are here.
Worked Examples: Calculating Employee NICS for Different Income Levels in 2025/26
To illustrate how NICs are calculated, consider three different monthly income levels: £750, £2,000, and £5,000.
Example 1: Monthly Earnings of £750 (Below the Primary Threshold of £1,048)
| Details | Amount (£) | Rate (%) | Employee NIC (£) | |
|---|---|---|---|---|
| Earnings up to Primary Threshold | 750 | 0 | 0.00 | |
| Earnings above Primary Threshold, up to and including the Upper Earnings Limit | 0 | 8 | 0.00 | |
| Earnings above Upper Earnings Limit | 0 | 2 | 0.00 | |
| Total | 750 | 0.00 |
Example 2: Monthly Earnings of £2,000 (Above the Primary Threshold of £1,048 but Below the Upper Earnings Limit of £4,189)
| Details | Amount (£) | Rate (%) | Employee NIC (£) | |
|---|---|---|---|---|
| Earnings up to Primary Threshold | 1,048 | 0 | 0.00 | |
| Earnings above Primary Threshold, up to and including the Upper Earnings Limit | 2,000 – 1,048 = 952 | 952 | 8 | 76.16 |
| Earnings above Upper Earnings Limit | 0 | 2 | 0.00 | |
| Total | 2,000 | 76.16 |
Example 3: Monthly Earnings of £5,000 (Above the Upper Earnings Limit of £4,189)
| Details | Amount (£) | Rate (%) | Employee NIC (£) | |
|---|---|---|---|---|
| Earnings up to Primary Threshold | 1,048 | 0 | 0.00 | |
| Earnings above Primary Threshold, up to and including the Upper Earnings Limit | 4,189 – 1,048 = 3,141 | 3,141 | 8 | 251.28 |
| Earnings above Upper Earnings Limit | 811 | 2 | 16.22 | |
| Total | 5,000 | 267.50 |
National Insurance Calculator for Employees
We offer a National Insurance calculator to help you quickly and easily calculate your National Insurance contributions. This tool allows you to input your earnings and instantly see how employee National Insurance deductions are calculated. It simplifies understanding your payslip deductions.
Employee NI Calculator 2025/26
Voluntary Contributions
If you have gaps in your National Insurance record, you can fill them by paying Class 3 contributions to qualify for contributory benefits like the State Pension. These contributions are £17.75 per week for the 2025/26 tax year.
National Insurance and State Pension Age
Employees stop paying Class 1 National Insurance when they reach State Pension age. However, employers continue to pay secondary Class 1 NICs on earnings for employees who have reached State Pension age.
Payment Process
National Insurance contributions are deducted from your wages through PAYE (Pay As You Earn) along with income tax.
Your employer will automatically deduct the appropriate amount based on your earnings and show it on your payslip. Your employer pays the deductions made to HMRC.
National Insurance for Employers
While this article focuses on employees, it’s worth noting that employers also pay National Insurance contributions.
Employers pay secondary Class 1 NICs on employee earnings above the Secondary Threshold.
In the 2025/26 tax year, the Secondary Threshold is £96 per week (£417 per month, £5,000 per year). Employers pay 15% on earnings above this threshold.
Conclusion
This article provides a clear picture of National Insurance for employees in the UK, focusing on the 2025/26 tax year. For further information, visit gov.uk or arrange a consultation with U&W.
