What is Employers National Insurance?

Employers National Insurance is a tax businesses pay on employee wages above a certain threshold, which is separate from the deductions made from the employee’s own salary.

What is Employers National Insurance?

Employers National Insurance (Secondary Class 1 NICs) is a financial contribution UK employers pay to the tax authority for eligible staff.

Unlike Primary contributions deducted from employees’ wages, this cost is borne entirely by your business, and will not affect the employee’s net pay.

These funds support the UK’s state welfare system, including the State Pension, unemployment benefits, and maternity allowance.

For growing companies, an accurate calculation of Employers National Insurance is vital for budgeting and cash flow management. Indeed, failing to calculate this correctly can lead to unexpected expenses and potential penalties from HMRC.

How much is Employers National Insurance?

As an employer, you will generally pay a set percentage Employers National Insurance rate on all employee wages falling above a Secondary Threshold. The rate and threshold are either frozen or updated at the beginning of each new tax year in April. Eligible businesses can reduce their National Insurance liability by claiming the Employment Allowance.

What are the current Employers National Insurance rates for the 2025/26 tax year?

The main rate for Employers Class 1 National Insurance has risen to 15% for the 2025/26 tax year. This increase from the previous 13.8% rate significantly impacts payroll budgets. The rate applies to all earnings above the Secondary Threshold for most standard, or Category A, employees, with other thresholds applying for other categories of workers.

What are the Employers National Insurance thresholds for the 2025/26 tax year?

The Secondary Threshold is now reduced to £5,000 annually (approx. £96 per week). This reduction means you start paying National Insurance Contributions (NICs) on a larger portion of earnings. However, the Upper Secondary Threshold for under-21s and other categories of workers remains aligned with the Upper Earnings Limit, to help keep costs contained for these categories.

Summary of rates and thresholds

Practical example: the cost to your business

The table below illustrates the cost impact for a typical employee earning £30,000 per annum.

In this scenario, the employer pays an additional £866 per annum. This increase represents a direct cost that can affect your gross profits if not managed effectively, highlighting why precise NIC tracking and planning is vital.

UK statutory employment rights guide

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Who needs to pay Employers NI?

Most UK employers must pay Class 1 NICs for any employee earning above the Secondary Threshold. This includes full-time and part-time staff on your payroll. Exceptions apply for businesses claiming the Employment Allowance with a total NI liability of less than £10,500, or those employing eligible zero-rate staff with an annual salary up to £50,270.

Do I pay for employees under 21 or apprentices?

You generally pay 0% on earnings up to the Upper Secondary Threshold (£50,270 per year) for employees under 21, apprentices under 25, veterans in their first year of civil employment, and employees working in Freeports or Investment Zones.

This relief is designed to encourage youth hiring, help veterans return to civilian work, and incentivise government designated special trade zones. Good payroll software will apply the correct category letter (M, H, V, etc.) to trigger the claiming of this relief automatically.

How are company directors assessed?

The National Insurance calculation for directors is based on an annual earnings period, rather than a weekly one. NICs are thus calculated on cumulative earnings over the tax year, ensuring accurate contributions regardless of irregular pay patterns or dividends.

How can I reduce my Employers NI liability?

The Employment Allowance allows eligible businesses to significantly reduce their annual National Insurance liability.

What is the Employment Allowance?

This Employment Allowance scheme offers a deduction of up to £10,500 per business per tax year. Crucially, the previous eligibility rule preventing businesses with over £100k liability from claiming has been removed, opening the relief up to more growing businesses.

How do I claim the Employment Allowance?

You can claim this deduction by submitting an Employer Payment Summary (EPS) to HMRC through your payroll software. You can do this before the tax year starts, or at any stage during it. Check your eligibility early to maximise cash flow benefits.

What about expenses and perks?

Employers must also pay National Insurance on taxable expenses and perks, or benefits in kind (BiK), such as company cars or private medical insurance.

What is Class 1A National Insurance?

Class 1A NICs apply to most taxable benefits in kind at a 15% rate for the 2025/26 tax year. These costs must be factored into your total workforce expenditure.

Unlike monthly Class 1 contributions, these are typically calculated annually and reported via P11D forms.

When will payrolling benefits become mandatory?

The government is phasing out the use of P11D forms, and from April 2027 all benefits in kind will need to be payrolled monthly, in line with the Making Tax Digital (MTD) programme. Modern software for SMEs will be essential for businesses handling this shift to automated monthly calculations.

How do I calculate and pay Employers NI?

Calculations should be automated through your HR and payroll process to ensure accuracy against the relevant thresholds.

How does the payment process work?

Whenever you pay employees, you report NICs with a Full Payment Submission (FPS) using the Real Time Information (RTI) system. You then make a monthly payment to the Revenue, covering deducted employee tax and NI, plus your employer contributions.

What happens if I pay late?

Missing the payment deadline, generally the 22nd of the month, or 19th if posting a cheque, will likely lead to interest charges and penalties, and disrupt your compliance record.

Using reliable tools helps check compliance automatically, ensuring you remit exactly what you owe, promptly.

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