Employer NI Calculator 2025/26

How Employer NI Works

Employer National Insurance is a tax paid by employers on the earnings of each employee. Unlike employee National Insurance, which is deducted from the worker's pay, employer NI is an additional cost on top of the gross salary. It does not appear on the employee's payslip and is paid directly by the employer to HMRC through the PAYE system.

For the 2025/26 tax year, employer NI is charged at a flat rate of 13.8% on all employee earnings above the secondary threshold of £5,000 per year. There is no upper earnings limit for employer NI, meaning the 13.8% rate applies to all earnings above the threshold with no cap. This is different from employee NI, which has a reduced rate above the upper earnings limit.

The employer NI contribution is calculated per employee. Each employee has their own secondary threshold, so you only start paying NI once that individual's earnings exceed £5,000 per year. For part-time workers or employees who join mid-year, the threshold is applied proportionally based on the pay period.

Employer NI is one of the largest hidden costs of employment in the UK. Many small business owners underestimate the true cost of hiring because employer NI is not always factored into salary budgets. For every employee earning above the threshold, the employer must budget for an additional 13.8% on top of the agreed salary. This means an employee on a £50,000 salary costs the employer £6,210 in NI alone, bringing the total to £56,210 before pension contributions and other benefits.

Employer NI is also known as secondary Class 1 National Insurance contributions. It is distinct from Class 1A NI (charged on benefits in kind) and Class 1B NI (charged on items in a PAYE Settlement Agreement). For most employers, the secondary Class 1 contribution on salaries is by far the largest NI cost.

Employer NI Rates 2025/26

The following table summarises the key employer NI rates and thresholds for the 2025/26 tax year, which runs from 6 April 2025 to 5 April 2026. The rate of 13.8% above the £5,000 threshold applies to all employers regardless of size.

The employer NI rate has been 13.8% since April 2022. The rate applies uniformly to all earnings above the secondary threshold, regardless of the employee's total salary. There are no higher or additional rate bands for employer NI — the calculation is straightforward compared to income tax. Employers pay the same 13.8% whether the employee earns £10,000 or £500,000, applied only to the portion above the £5,000 threshold.

It is worth noting that reduced secondary thresholds exist for certain categories of employee. Employers hiring employees under 21, apprentices under 25, or veterans in their first year of civilian employment may benefit from higher thresholds (up to £50,270), meaning they pay no employer NI on earnings up to that level. These concessions are designed to encourage employers to hire younger workers and veterans.

Employment Allowance 2025/26

The Employment Allowance is a government incentive that reduces an employer's National Insurance liability. For the 2025/26 tax year, the Employment Allowance is £10,500 per year, a significant increase from the £5,000 allowance available in 2024/25. This increase was announced in the Autumn Budget 2024 to partially offset the impact of the reduced secondary threshold.

The Employment Allowance works by reducing your total employer NI bill across all employees. It is not applied per employee — you receive one allowance per business, and it is offset against your total employer NI liability for the year. If your total employer NI bill is less than £10,500, you effectively pay no employer NI at all. If it exceeds £10,500, you pay the difference.

To be eligible for the Employment Allowance in 2025/26, you must meet the following criteria:

• Your employer NI liability in the previous tax year must have been less than £100,000
• You must have at least one employee (single-director companies with no other employees are not eligible)
• You must not be a public body or a company undertaking more than 50% of its work in the public sector
• You must not be a service company working under IR35 managed service company legislation

Most small and medium-sized businesses qualify for the Employment Allowance. You claim it through your payroll software at the start of each tax year. The allowance is typically used up during the first few months of the year, after which you pay employer NI as normal for the remainder of the year. If you use HMRC's Basic PAYE Tools, you can indicate your claim when you first submit an Employer Payment Summary (EPS) for the new tax year.

Connected companies and charities should note that only one Employment Allowance can be claimed per group of connected companies. If you have multiple PAYE schemes under connected companies, you must nominate one scheme to receive the allowance. Charities are eligible for the Employment Allowance regardless of their NI bill size, though they still cannot be a single-director company with no employees.

What Changed in April 2025

The April 2025 changes to employer National Insurance were announced in the Autumn Budget 2024 and represent the most significant shift in employer NI costs in recent years. The two main changes are:

1. Secondary threshold reduced from £9,100 to £5,000. This means employers now start paying NI on earnings above £5,000 instead of £9,100. For every employee earning above £9,100, this increases the employer NI bill by £565.80 per year (the additional £4,100 of earnings now subject to NI at 13.8%). For employees earning between £5,000 and £9,100, employers now pay NI where previously they paid nothing.

2. Employment Allowance increased from £5,000 to £10,500. This more than doubles the annual relief available to eligible employers. The government stated this increase was designed to protect small businesses from the full impact of the threshold reduction. For a business with four or fewer employees on average salaries, the increased allowance may fully offset the additional NI cost.

The net effect depends on the size of the business and the number of employees. For a sole employer with one employee on £30,000, the additional cost from the threshold change is £565.80, but the additional allowance is £5,500 — a net benefit. However, for larger businesses with many employees, the threshold reduction significantly outweighs the allowance increase, resulting in higher overall costs. A business with 20 employees on £30,000 each sees an additional cost of £11,316 from the threshold change but only £5,500 additional allowance — a net increase of £5,816 per year.

The government estimated these changes would raise approximately £25 billion per year, making it one of the largest tax-raising measures in recent budgets. The Office for Budget Responsibility (OBR) noted that much of this cost may ultimately be passed on to workers through lower wage growth, or to consumers through higher prices, though the short-term impact falls directly on employer balance sheets.

Worked Examples

Example 1: Employee on £30,000 (Without Employment Allowance)

An employer paying an employee a gross annual salary of £30,000, without claiming the Employment Allowance:

• Employee salary: £30,000
• Secondary threshold: £5,000
• Earnings above threshold: £30,000 - £5,000 = £25,000
• Employer NI (13.8%): £25,000 x 0.138 = £3,450.00
• Monthly employer NI: £287.50
• Total employment cost: £30,000 + £3,450 = £33,450
• Effective NI rate: 11.5%

Without the Employment Allowance, the employer pays £3,450 per year in National Insurance on top of the £30,000 salary. The effective rate of 11.5% shows the NI cost as a proportion of the total salary. This is lower than the headline 13.8% rate because the first £5,000 of salary is exempt from employer NI.

Example 2: Employee on £30,000 (With Employment Allowance)

The same employer claiming the £10,500 Employment Allowance:

• Gross NI liability: £3,450.00
• Employment Allowance: -£3,450.00 (capped at liability)
• Employer NI payable: £0.00
• Total employment cost: £30,000
• Saving from allowance: £3,450.00

The Employment Allowance of £10,500 completely eliminates the NI bill for this employee. The employer still has £7,050 of unused allowance that can offset NI costs for other employees. This demonstrates how powerful the allowance is for small businesses — a single employee on £30,000 generates less NI than the allowance covers.

Example 3: Employee on £60,000 (Without Employment Allowance)

An employer paying an employee a gross annual salary of £60,000:

• Employee salary: £60,000
• Earnings above threshold: £60,000 - £5,000 = £55,000
• Employer NI (13.8%): £55,000 x 0.138 = £7,590.00
• Monthly employer NI: £632.50
• Total employment cost: £60,000 + £7,590 = £67,590
• Effective NI rate: 12.7%

For a higher-paid employee, the employer NI cost is substantial at £7,590 per year. The effective rate is higher at 12.7% because a greater proportion of the salary falls above the £5,000 threshold. As salaries increase, the effective rate approaches the headline 13.8% rate asymptotically.

Example 4: Employee on £60,000 (With Employment Allowance)

The same employer claiming the Employment Allowance:

• Gross NI liability: £7,590.00
• Employment Allowance: -£7,590.00 (capped at liability)
• Employer NI payable: £0.00
• Saving from allowance: £7,590.00

Even on a £60,000 salary, the £10,500 Employment Allowance fully covers the NI liability with £2,910 remaining for other employees. However, remember the allowance is per business, not per employee. If this employer has multiple employees, the allowance is shared across all of them.

Common Mistakes

1. Forgetting to Budget for Employer NI

Many businesses, especially startups and small companies, set salary budgets without accounting for employer NI. When hiring an employee at £40,000, the actual cost to the business is at least £44,830 (before pension contributions). Failing to budget for this additional 13.8% can create cash flow problems, particularly when scaling the team quickly. Always factor in employer NI when forecasting headcount costs.

2. Not Claiming the Employment Allowance

The Employment Allowance is not applied automatically — you must claim it through your payroll software or HMRC's Basic PAYE Tools at the start of each tax year. Many eligible employers, particularly those who manage payroll manually or through basic software, miss out on up to £10,500 per year in savings. Review your eligibility at the start of every tax year and ensure the claim is submitted promptly.

3. Applying the Allowance Per Employee

A common misconception is that the Employment Allowance applies to each employee individually. In fact, the £10,500 allowance is per business (per PAYE scheme) and is offset against the total employer NI bill across all employees. A business with 10 employees does not receive £105,000 in allowance — it receives £10,500 total.

4. Not Considering Salary Sacrifice Savings

Salary sacrifice arrangements for pensions, cycle-to-work schemes, and electric vehicles reduce the employee's gross salary, which in turn reduces the employer NI liability. For example, if an employee earning £40,000 sacrifices £5,000 into their pension, the employer saves £690 per year in NI on that employee alone (£5,000 x 13.8%). Many employers overlook this as a legitimate cost-saving strategy that benefits both parties.

5. Ignoring the Impact of the 2025 Threshold Change

The reduction in the secondary threshold from £9,100 to £5,000 affects every employee earning above £5,000 per year. Employers who budgeted based on the old threshold may find their NI costs have increased significantly. For each employee earning above £9,100, the additional annual cost is £565.80. A business with 50 employees on average sees an increase of approximately £28,290 per year, only partially offset by the additional £5,500 in Employment Allowance.

6. Confusing Employer NI with Employee NI

Employer NI and employee NI are separate charges with different rates, thresholds, and rules. Employee NI is 8% between £12,570 and £50,270, then 2% above that. Employer NI is 13.8% above £5,000 with no upper limit. Employee NI is deducted from the employee's pay; employer NI is an additional cost to the business. When calculating total employment costs, you must account for both, as they are separate line items in your payroll.