National Insurance explained

What is National Insurance?

National Insurance (NI) is a compulsory contribution on earnings, paid by employees, employers and the self-employed. It sits beside Income Tax on your payslip but is worked out separately, on different thresholds.

As an employee you pay Class 1 National Insurance. Your employer pays a separate employer's NI contribution on top of your salary — you do not see this on your payslip, but it is a real cost of employing you.

What does National Insurance pay for?

Unlike most taxes, National Insurance is paid into the National Insurance Fund. The fund pays for the State Pension and other contributory benefits, such as New Style Jobseeker's Allowance and Employment and Support Allowance, and a small amount goes to the NHS. Your own contributions also build the record that decides your State Pension.

Employee Class 1 rates for 2026/27

Payroll applies the thresholds to each pay period, not the year: £242 to £967 a week, or £1,048 to £4,189 a month. A month with a bonus is worked out on that month's pay alone, and unlike Income Tax there is no adjustment over the year.

How much National Insurance will I pay?

Employee Class 1 NI for 2026/27 at different salaries, with no salary sacrifice. The monthly figure is what monthly payroll takes, on the monthly thresholds.

Is National Insurance taken before or after tax?

Neither comes first. Your employer works out Income Tax and National Insurance separately from the same gross pay and takes both off before you are paid. Paying NI does not reduce the pay you are taxed on, and Income Tax does not reduce the pay NI is worked out on.

Pension contributions are where they differ. A salary sacrifice pension lowers the pay both are worked out on. A net pay pension lowers your taxable pay but not your NI.

Worked example: £40,000 salary

Worked example: £60,000 salary

How NI differs from income tax

There are several important differences between NI and income tax:

• NI has no personal allowance taper above £100,000 — the thresholds are fixed.
• NI is not charged on pension income or investment income, only earned income.
• NI contributions build entitlement to the State Pension — you need 35 qualifying years for the full new State Pension (£241.30/week in 2026/27).
• Salary sacrifice pension contributions reduce your NI-able pay, so you save NI as well as income tax when contributing to a pension this way.

What counts as NI qualifying years?

A qualifying year is any tax year in which you earn at least the Lower Earnings Limit (£6,708 in 2026/27). You do not need to pay NI — just earn above this threshold. You can also get qualifying years through NI credits (e.g. while claiming Child Benefit or being a carer).

If you have gaps in your NI record, you can usually pay voluntary Class 3 contributions (£18.40 a week in 2026/27) to fill them. Check your State Pension forecast first: an extra year does not always raise your pension.

Employer National Insurance

Employers pay 15% NI on an employee's earnings above £5,000 a year (the Secondary Threshold, £96 a week) in 2026/27. It is not taken from your pay, but on a £40,000 salary it adds £5,250, so the employer's cost is about £45,250 before any pension contribution.

NI and the self-employed

Self-employed people pay Class 4 NI: 6% on profits between £12,570 and £50,270, then 2% above, through Self Assessment rather than PAYE. Class 2 is no longer paid on profits of £7,105 or more: it is treated as paid, so the year still counts towards your State Pension. Below that you can choose to pay voluntary Class 2 at £3.65 a week. Our self-employed tax calculator works out both.