Employer National Insurance 2026/27: 15% Rate, GBP 5,000 Threshold and Employment Allowance

The Autumn Budget 2024 delivered the largest increase in employer National Insurance in a generation. From April 2025, the secondary rate rose from 13.8% to 15%, and the Secondary Threshold was cut from GBP 9,100 to GBP 5,000 per year. Both changes together have materially increased the cost of employing staff in 2026/27. This guide shows you the exact numbers and the strategies available to manage your payroll costs.

The 2026/27 Employer NI Structure

There is no upper earnings limit for employer NI. Unlike employee National Insurance -- which reduces from 8% to 2% above GBP 50,270 -- the 15% employer rate applies on all earnings above GBP 5,000 without any ceiling.

Calculating the Impact of the April 2025 Changes

The combined effect of the rate rise and threshold reduction is significant across all pay levels.

Three Worked Examples

Employee 1: National Living Wage worker

GBP 12.71 per hour x 37.5 hours x 52 weeks = GBP 24,781 per year

Employee 2: GBP 35,000 salary

Employee 3: GBP 60,000 salary

Three-Staff Example

A small business with three employees on salaries of GBP 25,000, GBP 32,000, and GBP 45,000.

After claiming the Employment Allowance of GBP 10,500, net employer NI payable: GBP 2,550.

Under the old rules (13.8% above GBP 9,100), total employer NI would have been approximately GBP 8,530. But without the increased Employment Allowance (which was only GBP 5,000 before April 2025), net payment would have been GBP 3,530. So for this small employer, the net effect is broadly neutral -- exactly what the government intended the EA increase to achieve for smaller businesses.

The Employment Allowance: GBP 10,500 in 2026/27

The Employment Allowance (EA) offsets employer NI for eligible businesses. It was increased from GBP 5,000 to GBP 10,500 in April 2025 to cushion smaller employers from the rate rise.

Eligibility

You can claim the EA if:

• Your total employer NI bill was less than GBP 100,000 in the previous tax year
• You employ at least one employee (or director plus at least one other employee)
• You are not a public sector employer (charities are eligible)

Single-director companies with only one employee -- the director -- cannot claim. A second employee on the payroll is required.

How to Claim

Claim the EA through your payroll software when submitting the Employer Payment Summary (EPS) to HMRC. Select "Yes" for Employment Allowance on the EPS. The allowance is applied automatically against each payroll run, reducing the employer NI payment until the GBP 10,500 is exhausted or the tax year ends.

EA by Business Size

Class 1A NI on Benefits in Kind

Employers also pay Class 1A NI at 15% on the taxable value of most benefits in kind, including:

• Company cars and vans
• Private medical insurance
• Employer-provided non-trivial gifts
• Non-cash bonuses above GBP 50

Class 1A NI is reported on form P11D(b) and paid by 19 July (22 July for BACS) following the end of the tax year.

Example: An employer provides a GBP 45,000 electric company car with a 4% BIK rate. Taxable benefit = GBP 1,800. Class 1A NI = 15% x GBP 1,800 = GBP 270 per year. A petrol car at 30% BIK produces GBP 13,500 taxable benefit and GBP 2,025 in Class 1A NI -- nearly GBP 1,755 more annually.

Freeport and Investment Zone NI Relief

Employers in designated UK Freeport and Investment Zone tax sites benefit from a zero rate of employer NI on new employee earnings up to GBP 25,000 per year, provided:

• The employee was hired after the site was designated
• The employee spends at least 60% of their working time at the qualifying site
• The relief applies for three years from the date of hire

For a new employee hired in a Freeport on GBP 25,000 salary, the employer NI saving is 15% x (GBP 25,000 - GBP 5,000) = GBP 3,000 per year, for three years -- a total saving of GBP 9,000 per new hire. Check gov.uk for the current list of qualifying zones.

Strategies to Manage Employer NI Costs

1. Salary Sacrifice

Salary sacrifice reduces the cash salary on which employer NI is calculated. The employer pays no NI on the sacrificed amount.

Popular schemes in 2026/27:

• Pension contributions: Employee gives up salary; employer contributes to pension. Employer NI saved: 15% x amount sacrificed.
• Electric vehicle salary sacrifice: 4% BIK on the car's P11D value generates very low Class 1A NI. The employer NI saving on the sacrificed salary typically exceeds the Class 1A cost.
• Cycle to Work scheme: No employer NI on the value of the cycle and accessories, up to GBP 1,000 (or higher for qualifying green transport).

2. Employer NI Allowable as a Business Expense

Employer NI is fully deductible against Corporation Tax or income tax profits. A GBP 10,000 employer NI bill reduces taxable profits by GBP 10,000. At the 25% Corporation Tax rate, this reduces tax by GBP 2,500. The net after-tax cost of employer NI is therefore lower than the headline figure.

3. Accurate Payroll Forecasting

For every new hire or pay review, calculate the full employer NI cost upfront:

(Salary - GBP 5,000) x 15% = employer NI per employee

Sum across all employees, deduct the Employment Allowance if eligible, and add Class 1A NI on any benefits. This gives your total expected employer NI liability -- a number that should feed directly into pricing, margins, and cash flow planning.

Employee Take-Home Pay: The Other Side of the Equation

While this article focuses on employer NI, your employees also pay National Insurance at 8% on earnings between GBP 12,570 and GBP 50,270, and 2% above. Understanding what your employees actually receive after all deductions -- income tax, employee NI, pension contributions -- is essential for recruitment, retention, and pay review discussions. Use the CalcHub employer NI and take-home pay calculator to see both the total employment cost per employee and what they actually receive in their bank account, side by side.