UK Tax Year 2026/27: National Insurance Contributions and Classes

National Insurance in 2026/27: The Landscape

National Insurance Contributions (NICs) fund the State Pension, NHS and certain benefits. Unlike income tax (which changed at the 2024 Budget but froze thereafter), NI underwent its major structural shifts in April 2025 — 2026/27 sees those changes bedded in with no further movement.

Timeline of recent NI changes

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Employee National Insurance (Class 1) 2026/27

Employees pay Class 1 NICs on earnings above the Primary Threshold (PT):

The PT is aligned with the Personal Allowance at £12,570 — a change made in 2022/23. This means the first £12,570 of earnings is free of both income tax AND employee NI.

Worked examples

Employee earning £28,000:

• NI on (£28,000 − £12,570) = £15,430 × 8% = £1,234/yr (£103/mo)

Employee earning £55,000:

• NI on (£50,270 − £12,570) = £37,700 × 8% = £3,016
• NI on (£55,000 − £50,270) = £4,730 × 2% = £95
• Total: £3,111/yr (£259/mo)

Employee earning £80,000:

• NI on £37,700 × 8% = £3,016
• NI on (£80,000 − £50,270) = £29,730 × 2% = £595
• Total: £3,611/yr (£301/mo)

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Employer National Insurance (Class 1 Secondary) 2026/27

Employers pay NI on employee earnings above the Secondary Threshold (ST):

The reduction in the ST from £9,100 to £5,000 in April 2025 substantially increased employer NI costs. An employer now pays 15% NI from the very start of most employment contracts.

Employer NI on typical salaries (2026/27)

Total employment cost to an employer on a £40,000 salary: £40,000 + £5,250 NI = £45,250 before any pension contributions or benefits.

Employment Allowance 2026/27

Eligible employers can deduct up to £10,500 from their total employer NI bill per tax year. Eligibility:

• Employer NI bill for prior year must be under £100,000
• Cannot claim if sole employee is director/shareholder (single-director companies excluded unless other employees)

For a small business paying 3 employees at £30,000 each:

• Total employer NI: 3 × £3,750 = £11,250
• Less Employment Allowance: −£10,500
• Net employer NI payable: £750

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Self-Employed National Insurance 2026/27

Class 4 NI (main self-employed contribution)

Class 4 NI is calculated via Self Assessment and due with the January 31 payment.

Class 2 NI: abolished April 2024

Before April 2024, self-employed individuals paid a flat £3.45/week Class 2 NI which provided State Pension and contributory benefit access. This was abolished — State Pension is now accessed via Class 4 NI payments (provided profits are above the Lower Profits Limit of £12,570).

Self-employed people with profits below £6,725 (the Small Profits Threshold) get NI credits towards their State Pension without paying any NI — the threshold was maintained to protect those with low/variable income.

Voluntary Class 3 NI (filling gaps)

• Rate: £17.45/week (£907.40/year) for 2025/26 — 2026/27 rate usually increases slightly with RPI
• Buy a qualifying year of State Pension
• Return: £11,502 / 35 qualifying years = £328.63/yr of State Pension (at 2025/26 rates)
• Break-even: £907 ÷ £328.63 = 2.8 years — very attractive if you have gaps

You can buy up to 6 years of gaps going back in the current tax year, plus gaps from the previous 6 tax years (and further back for specific transitional windows ending April 2025).

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Class 1A and Class 1B NI

These apply to employers on benefits in kind:

• Class 1A: 15% on P11D taxable benefits (company car, private medical, etc.) — paid July each year
• Class 1B: 15% on items in a PAYE Settlement Agreement (PSA)

Both increased from 13.8% to 15% in April 2025 alongside employer Class 1.

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NI and Salary Sacrifice

Salary sacrifice reduces both employee and employer NI — a key advantage over pension/ISA saving outside payroll:

For a 40% taxpayer using salary sacrifice for pension: the £5,000 contribution saves £5,000 × 40% IT + £5,000 × 8% NI = £2,400 in tax and NI — compared to a post-tax SIPP contribution where only the £2,000 IT is recovered (not the NI).

Employers often share part of the 15% NI saving as enhanced contributions — always ask your HR department.

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Directors and NI

Company directors have specific NI rules — assessed on an annual earnings period rather than weekly/monthly. This means:

• If salary is paid as a lump sum early in the tax year, NI is assessed on the full annual amount from the outset
• A director paid £12,570 salary (to use PA, below PT) owes £0 employer and £0 employee NI
• Dividends above £500 are subject to Dividend Tax (not NI) — this is the standard director remuneration structure

For a one-person company in 2026/27:

• Director salary: £12,570 → zero NI for director or company
• Remaining profit paid as dividends: taxed at 8.75% (basic), 33.75% (higher), 39.35% (additional) — no NI

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The Combined Tax and NI Burden

Understanding the marginal combined rate at each salary point is essential for planning:

The 62% combined rate in the PA taper zone (£100k–£125,140) is the highest effective marginal rate in the UK tax system for most individuals. Every pound earned in this band triggers 60p in combined IT and NI.

Previous: Income Tax Bands 2026/27 | Next in this series: ISA and Pension Allowances 2026/27