UK National Insurance Calculator 2025/26

How National Insurance Works

National Insurance (NI) is a tax on earnings and self-employment profits in the United Kingdom. Unlike income tax, which funds general government spending, NI contributions go towards specific benefits including the State Pension, Jobseeker's Allowance, Employment and Support Allowance, and Maternity Allowance. The amount you pay depends on how much you earn and whether you are employed or self-employed.

NI was first introduced in 1911 as a contributory system — the idea being that workers pay in during their working lives and receive benefits when they need them. Today it operates similarly to income tax in that it is deducted from your earnings, but the rates, thresholds, and rules are different. Understanding NI is essential for accurately calculating your take home pay and understanding the true cost of employment.

For employees, NI is deducted from your wages by your employer through PAYE alongside income tax. Your employer also pays a separate NI contribution on your behalf, which you do not see deducted from your pay but which forms a significant additional employment cost. Self-employed workers pay NI through Self Assessment as part of their annual tax return.

Employee National Insurance (Class 1) 2025/26

Class 1 NI contributions are split between the employee and the employer. As an employee, you pay NI on your earnings above the Primary Threshold:

The Primary Threshold is aligned with the income tax personal allowance at £12,570. This means both income tax and NI kick in at the same earnings level, making it straightforward to understand when deductions begin. The Upper Earnings Limit of £50,270 matches the higher rate income tax threshold.

It is important to note that you still accrue NI credits for State Pension purposes even if you earn between £6,396 (the Lower Earnings Limit) and £12,570, despite not actually paying any NI. This ensures lower earners still build up pension entitlement.

Employer National Insurance 2025/26

Employers pay Class 1 Secondary NI contributions on their employees' earnings above the Secondary Threshold. From April 2025, the rates are:

The employer NI threshold was significantly reduced from £9,100 to £5,000 in April 2025, and the rate increased from 13.8% to 15%. This represents one of the largest increases in employment costs in recent years. For a typical employee earning £30,000, employer NI is now £3,450 per year. Businesses, particularly those with large workforces, have seen substantial increases in their wage bills.

Employer NI is paid entirely by the employer and does not appear as a deduction on your payslip. However, it affects the total cost of employing you and can influence decisions about pay rises, hiring, and whether to use contractors instead of employees.

Self-Employed National Insurance 2025/26

Self-employed workers pay two classes of National Insurance: Class 2 and Class 4. Both are calculated based on your annual taxable profits.

Class 2 NI

Class 2 NI is a flat-rate contribution of £3.45 per week for 2025/26, giving an annual total of £179.40. You pay Class 2 if your profits exceed the Small Profits Threshold, which is aligned with the Primary Threshold at £12,570. If your profits are below this level, you do not pay Class 2 but you can choose to make voluntary contributions to maintain your NI record.

Class 4 NI

Class 4 NI is a profit-based contribution similar in structure to employee Class 1 NI but at lower rates:

The Class 4 rates are lower than employee Class 1 rates (6% versus 8% in the main band), reflecting the fact that self-employed workers do not receive some of the benefits that employees get, such as statutory sick pay and employer pension contributions. However, self-employed workers also do not pay an equivalent of employer NI, which is a significant saving.

What Changed in April 2025

April 2025 brought significant changes to National Insurance, particularly for employers:

• Employer NI threshold reduced: The Secondary Threshold was cut from £9,100 to £5,000 per year. This means employers now pay NI on a much larger portion of each employee's earnings, significantly increasing employment costs.
• Employer NI rate increased: The employer rate increased from 13.8% to 15%. Combined with the lower threshold, this represents a substantial increase in the cost of employing staff.
• Employment Allowance increased: To partially offset the employer NI increases, the Employment Allowance was raised from £5,000 to £10,500 per year. This allows eligible employers to reduce their employer NI bill by up to £10,500 annually. The eligibility threshold was also removed, meaning all employers can now claim regardless of their previous year's NI liability.
• Employee rates unchanged: The employee NI rates of 8% and 2% remain the same as in 2024/25, following the 2p cut that took effect in January 2024. The Primary Threshold and Upper Earnings Limit are also unchanged.

Worked Examples

Example 1: Employee Earning £30,000

An employee earning £30,000 per year:

• Employee NI: (£30,000 - £12,570) x 8% = £1,394.40 per year (£116.20 per month)
• Employer NI: (£30,000 - £5,000) x 13.8% = £3,450.00 per year
• Total employment NI cost: £4,844.40

The employer pays almost 2.5 times more NI than the employee on this salary. The total NI cost of £4,844.40 represents an additional 16% on top of the gross salary. This is a cost that employees rarely see but which significantly affects the economics of employment.

Example 2: Employee Earning £60,000

• Employee NI below UEL: (£50,270 - £12,570) x 8% = £3,016.00
• Employee NI above UEL: (£60,000 - £50,270) x 2% = £194.60
• Total employee NI: £3,210.60 per year (£267.55 per month)
• Employer NI: (£60,000 - £5,000) x 13.8% = £7,590.00 per year

Example 3: Self-Employed with £30,000 Profit

• Class 2 NI: £3.45 x 52 = £179.40 per year
• Class 4 NI: (£30,000 - £12,570) x 6% = £1,045.80 per year
• Total NI: £1,225.20 per year

Compared to an employee on the same income, the self-employed worker pays £1,225.20 versus £1,394.40 in personal NI — a saving of £169.20. Additionally, there is no employer NI equivalent for self-employed workers, saving a further £3,450. This is one reason why self-employment can be more tax-efficient, though it comes with fewer employment benefits and protections.

Common Mistakes When Calculating NI

1. Confusing Employee and Employer NI

Employee NI reduces your take home pay. Employer NI is an additional cost paid by your employer and does not appear on your payslip. When calculating your take home pay, only employee NI is relevant. However, when evaluating the total cost of employment (for example, when deciding between employment and self-employment), employer NI should be considered.

2. Using the Wrong NI Category

Most employees are in NI category A, but there are many categories with different rates. For example, employees under 21 (category M) and apprentices under 25 (category H) have reduced employer NI. Employees over State Pension age (category C) pay no employee NI at all. Using the wrong category will give incorrect results.

3. Not Accounting for the Employer Threshold Change

The reduction in the employer NI threshold from £9,100 to £5,000 in April 2025 is significant. If you are using older figures or a calculator that has not been updated, your employer NI calculations will be too low. Always ensure you are using rates for the current tax year.

4. Mixing Up Self-Employed and Employed Rates

Self-employed Class 4 NI (6%/2%) is different from employee Class 1 NI (8%/2%). The thresholds are similar but the rates differ. Self-employed workers also pay Class 2 NI which has no equivalent for employees. Make sure you select the correct employment type when using a NI calculator.