Pillar Guide · Updated June 2026

Employer National Insurance 2026/27: 15% Rate, GBP 5,000 Threshold, Employment Allowance GBP 10,500

From April 2025, employers pay 15%National Insurance on each employee's earnings above just GBP 5,000 per year -- up from 13.8% on earnings above GBP 9,100. The Employment Allowance rose to GBP 10,500, and Class 1A on benefits in kind remains at 15%. This comprehensive guide explains every aspect of employer NI in 2026/27: rates, thresholds, the real cost per employee at different salary levels, strategies to reduce NI through salary sacrifice and Employment Allowance, Class 1A on benefits, Class 1B settlement agreements, zero-hours NI, and the Apprenticeship Levy interaction.

Last updated: 21 June 2026Last reviewed: 21 June 2026How we verify

The 15% Rate and GBP 5,000 Threshold

Employer Class 1 National Insurance (sometimes called secondary NI) is the contribution paid by employers on top of each employee's wages. From April 2025, the key figures are:

Parameter	Before April 2025	April 2025 onwards
Employer NI rate (Class 1)	13.8%	15%
Secondary threshold (annual)	GBP 9,100	GBP 5,000
Secondary threshold (monthly)	GBP 758	GBP 417
Secondary threshold (weekly)	GBP 175	GBP 96
Employment Allowance	GBP 5,000	GBP 10,500
Class 1A on benefits	15%	15%

The formula for calculating employer NI on a single employee is:

Employer NI = (Annual earnings -- GBP 5,000) × 15%

There is no upper earnings limit for employer NI -- unlike employee NI, which drops to 2% above GBP 50,270, employer NI continues at 15% on all earnings above the secondary threshold, no matter how high the salary. This makes employer NI more expensive at the top end of the salary spectrum.

How the Secondary Threshold Works

The secondary threshold of GBP 5,000 per year means that employer NI is only due on earnings above that amount. Each employee is treated separately.

Example: Calculating employer NI with the secondary threshold

Employee earning GBP 30,000 per year:

Employer NI = (GBP 30,000 -- GBP 5,000) × 15% = GBP 25,000 × 15% = GBP 3,750 per year or GBP 312.50 per month.

The threshold is split into monthly (GBP 417) and weekly (GBP 96) amounts for payroll purposes. If an employee is paid weekly, employer NI is due on earnings above GBP 96 per week. If monthly, above GBP 417 per month.

The lower secondary threshold (down from GBP 9,100) has significantly expanded the number of employees subject to employer NI, including more part-time, apprentice, and minimum-wage workers.

Real Cost Per Employee at Different Salary Levels

The total employment cost goes well beyond the salary advertised. Below is the employer's total cost (including NI and statutory pension) for different salary levels in 2026/27:

Salary	Employer NI (15%)	Pension (3% min)	Total Cost	Cost Uplift
GBP 20,000	GBP 2,250	GBP 600	GBP 22,850	14.3%
GBP 25,000	GBP 3,000	GBP 750	GBP 28,750	15.0%
GBP 30,000	GBP 3,750	GBP 900	GBP 34,650	15.5%
GBP 35,000	GBP 4,500	GBP 1,050	GBP 40,550	15.9%
GBP 40,000	GBP 5,250	GBP 1,200	GBP 46,450	16.1%
GBP 50,000	GBP 6,750	GBP 1,500	GBP 58,250	16.5%

This table shows that the true employment cost is typically 14--17% above the headline salary. Employers should budget accordingly when hiring, especially given the April 2025 rate and threshold changes increased costs significantly across the salary range.

Employment Allowance: GBP 10,500

The Employment Allowance is a relief that allows eligible employers to reduce their annual employer NI bill by up to GBP 10,500. It was doubled from GBP 5,000 to GBP 10,500 from April 2025, partly to offset the impact of the rate increase and threshold reduction on smaller employers.

The allowance works by offsetting against employer NI liability in real time -- each time you run payroll, the Employment Allowance reduces the employer NI due until the full GBP 10,500 is used up. If your total employer NI liability for the year is less than GBP 10,500, you simply pay nothing; you cannot claim a cash refund of the unused balance.

Who qualifies in 2026/27:

Your employer NI liability was below GBP 100,000 in the previous tax year (2025/26)
You are NOT a sole director company with no other employees
You are NOT a public authority (excluding charities)
Your business is not connected to another business that has already claimed the allowance
You are not a non-profit body controlled wholly by local authorities

To claim, tick the "Employment Allowance" box in your payroll software at the start of each tax year (6 April), or submit an Employer Payment Summary (EPS) to HMRC. You must re-claim each year -- it does not roll over automatically.

Sole Director Rule

Sole director companies are excluded from Employment Allowance, even if the director earned very little. A sole director company employing one full-time office manager (not a director), however, would qualify, as it has employees other than directors.

Class 1A: NI on Benefits in Kind

When you provide non-cash benefits to employees -- company cars, private medical insurance, gym memberships, interest-free loans above GBP 10,000, or employer-paid school fees -- you are liable for Class 1A National Insuranceat 15% on the taxable value of those benefits.

Unlike Class 1 NI (paid monthly through payroll), Class 1A is an annual obligation:

Report each employee's benefits on form P11D by 6 July following the tax year end
Submit form P11D(b) declaring the total Class 1A liability
Pay by 22 July electronically (19 July by cheque)

Example: Class 1A on a company car

A company car with a list price of GBP 30,000 and CO₂ emissions of 120g/km has a benefit in kind value of 32% × GBP 30,000 = GBP 9,600 per year. Class 1A NI: 15% × GBP 9,600 = GBP 1,440/yr. The employee also pays income tax on GBP 9,600 through their PAYE code, but NOT employee NI.

Some benefits are exempt from both income tax and Class 1A NI: employer pension contributions, workplace nursery provision, Cycle to Work scheme equipment (within limits), and approved working-from-home payments (up to GBP 6 per week without evidence).

Class 1B: PAYE Settlement Agreements (PSA)

Class 1B National Insurance is less common but important for employers using PAYE Settlement Agreements (PSAs). A PSA is a voluntary agreement with HMRC to pay a single agreed sum to cover PAYE tax, employee NI, and employer NI on specified benefits or expenses that would otherwise be taxable or result in complicated individual calculations.

When an employer settles through a PSA, the employer must also pay Class 1B NIat 15% on the total amount settled. This is in addition to any Class 1A or Class 1 NI already due. PSAs are typically used for:

Historical errors or omissions (e.g. unaccounted benefits from previous years)
One-off payments or bonuses with uncertain tax treatment
Round-sum settlements to simplify end-of-year compliance

PSAs are voluntary and require HMRC approval. The employer pays a single settlement amount to cover all taxes and Class 1B NI, avoiding the need to recalculate individual employee tax codes retroactively.

Salary Sacrifice and Employer NI Savings

Salary sacrifice is one of the most effective ways to reduce employer NI costs. In a salary sacrifice arrangement, an employee gives up part of their gross salary and the employer makes an equivalent contribution (e.g. to a pension, or as a cycle-to-work or EV car scheme benefit). Because the employee's gross salary is reduced, employer NI is calculated on the lower figure.

Salary sacrificed	Employer NI saving (15%)	Employee NI saving (8%)	Combined saving
GBP 1,000	GBP 150	GBP 80	GBP 230
GBP 2,000	GBP 300	GBP 160	GBP 460
GBP 3,000	GBP 450	GBP 240	GBP 690
GBP 5,000	GBP 750	GBP 400	GBP 1,150
GBP 10,000	GBP 1,500	GBP 800	GBP 2,300

Many employers pass their NI saving (or part of it) into the employee's pension as an additional contribution. On a GBP 5,000 salary sacrifice, the employer saves GBP 750 in NI -- adding GBP 750 extra to the pension costs the employer nothing net, yet provides the employee with a substantially enhanced pension contribution.

Salary sacrifice must be documented formally and applies only to specific benefits (pension, cycle-to-work, electric car, parking, nursery, sports facilities). The employee sacrifices actual pay, so statutory rights based on salary may be affected (e.g. statutory redundancy is calculated on the reduced salary post-sacrifice).

Zero-Hours and Part-Time Workers

Employer NI applies to all employees regardless of hours worked, as long as they earn above the secondary threshold (GBP 5,000 per year or GBP 417 per month).

Example: Zero-hours worker

A zero-hours worker paid GBP 300 in month 1 and GBP 200 in month 2 costs the employer nothing in NI (both below GBP 417 monthly threshold). But if paid GBP 600 in month 3, the employer owes 15% × (GBP 600 -- GBP 417) = 15% × GBP 183 = GBP 27.45.

A part-time worker on GBP 15,000 per year (20 hours/week) attracts the same 15% employer NI on (GBP 15,000 -- GBP 5,000) = GBP 1,500 × 15% = GBP 225, as a full-time employee on GBP 15,000.

The lower secondary threshold (GBP 5,000 from April 2025, down from GBP 9,100) has significantly increased the number of part-time and zero-hours workers subject to employer NI. Many retailers, hospitality, and care businesses have seen a substantial increase in employer NI bills as a result.

Employers should calculate employer NI on a per-employee, per-month basis, using the monthly threshold (GBP 417) rather than trying to annualize variable hours.

Apprenticeship Levy Interaction

The Apprenticeship Levy is a separate payroll tax (not National Insurance) of 0.5% on total payroll costs, payable by employers with an annual payroll bill above GBP 3 million. It is calculated on all employee earnings without a threshold.

The Apprenticeship Levy is independent of employer NI -- you pay both 15% Class 1 NI on earnings above GBP 5,000 and 0.5% Apprenticeship Levy on all payroll. However, employers can claim an annual allowance of GBP 15,000 against the levy, so the effective cost is:

Apprenticeship Levy = (Total payroll -- GBP 3,000,000) × 0.5% -- GBP 15,000 allowance

Example: An employer with a GBP 4 million payroll:

Levy = (GBP 4,000,000 -- GBP 3,000,000) × 0.5% -- GBP 15,000 = GBP 1,000,000 × 0.5% -- GBP 15,000 = GBP 5,000 -- GBP 15,000 = GBP 0 (allowance covers the cost).

Employers can use the Apprenticeship Levy to fund apprenticeships within their business or transfer funds to an apprenticeship training provider. Employers above the GBP 3 million threshold should budget for both employer NI and Apprenticeship Levy in their payroll planning.

Impact on Small Businesses

The April 2025 changes -- raising the rate from 13.8% to 15% and cutting the secondary threshold from GBP 9,100 to GBP 5,000 -- have had a complex impact on small businesses:

Benefits of the changes for small businesses:

The Employment Allowance doubled to GBP 10,500, wiping out employer NI for many small firms
Sole directors (a common business structure) are protected from claiming the allowance and thus do not lose it to the rate rise
Many micro-businesses (under GBP 30,000 payroll) pay no employer NI at all thanks to the allowance

Challenges for small businesses:

Businesses with GBP 50,000--GBP 100,000 payroll now pay significantly more in employer NI due to the lower threshold
Industries with many part-time workers (hospitality, retail, care) have been hit hardest
Hiring additional staff becomes more expensive, potentially delaying growth
Once payroll exceeds GBP 100,000, the Employment Allowance is lost entirely, creating a cliff edge

Small business example

A care provider with 5 part-time staff on GBP 20,000 each (total GBP 100,000 payroll):

Gross employer NI: 5 × 15% × (GBP 20,000 -- GBP 5,000) = 5 × GBP 2,250 = GBP 11,250. Employment Allowance (GBP 10,500) reduces this to GBP 750 net. But if the sixth staff member is hired (bringing payroll to GBP 120,000), the employer loses the allowance and now pays GBP 11,250 gross, a cliff-edge penalty.

Frequently asked questions

What is the employer National Insurance rate in 2026/27?

The employer (secondary) Class 1 National Insurance rate in 2026/27 is 15%. This was increased from 13.8% from 6 April 2025, as announced in the October 2024 Autumn Budget. At the same time, the secondary threshold (the point at which employer NI becomes payable) was reduced from GBP 9,100 per year to GBP 5,000 per year. Both changes apply to all employees earning above the threshold, from apprentices to directors. For a full-time employee on GBP 30,000, employer NI in 2026/27 is 15% × (GBP 30,000 -- GBP 5,000) = GBP 3,750 per year. Before April 2025 (at the old 13.8% rate and GBP 9,100 threshold), the same employee cost GBP 2,882 in employer NI -- an increase of GBP 868 per employee per year, or 30%.

Who qualifies for Employment Allowance of GBP 10,500?

The Employment Allowance allows eligible employers to reduce their employer Class 1 NI liability by up to GBP 10,500 per tax year from April 2025 -- raised from GBP 5,000. The allowance is claimed through payroll software each tax year and offsets against employer NI in real time. To qualify in 2026/27, your employer NI liability must have been below GBP 100,000 in the previous tax year. Exclusions include: sole director companies with no other employees (or only employees who are also directors), public authorities, employers who have received de minimis state aid that would be exceeded by the allowance. If you qualify, you can eliminate your entire employer NI bill up to GBP 10,500 -- particularly valuable for employers with several part-time or lower-paid staff.

What is Class 1A National Insurance and when is the deadline?

Class 1A National Insurance is paid by employers on the taxable value of benefits in kind provided to employees -- company cars, private medical insurance, employer-provided gym memberships, and other non-cash perks. In 2026/27 the Class 1A rate is 15% (matching the main employer NI rate). Class 1A is reported on form P11D (for each employee receiving benefits) and form P11D(b) (the total liability), both due by 6 July following the end of the tax year. The Class 1A payment itself is due by 22 July (if paying electronically) or 19 July (by cheque). Unlike Class 1 NI which is paid monthly through payroll, Class 1A is an annual payment. Employees pay income tax on benefits in kind through their PAYE tax code but do not pay NI themselves on benefits.

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How does salary sacrifice reduce employer National Insurance?

Salary sacrifice is an arrangement where an employee gives up part of their cash salary in exchange for an employer contribution -- most commonly a pension contribution, but also cycle-to-work scheme or electric car scheme. Because the employee's gross salary is reduced, employer NI (15%) is calculated on a lower figure. If an employee earning GBP 40,000 sacrifices GBP 5,000 into their pension via salary sacrifice, the employer pays NI on GBP 35,000 instead of GBP 40,000 -- saving 15% × GBP 5,000 = GBP 750 in employer NI per year. Many employers pass all or part of this NI saving back into the employee's pension as an additional contribution, making salary sacrifice a win for both parties. At scale -- say 50 employees each sacrificing GBP 3,000 -- the employer saves 15% × GBP 150,000 = GBP 22,500 annually in employer NI.

When does the secondary threshold of GBP 5,000 apply?

The secondary threshold of GBP 5,000 per year applies to all employees earning above that amount, and employer NI is calculated on earnings above this threshold. The threshold is split into monthly (GBP 417) and weekly (GBP 96) amounts for payroll purposes. Importantly, there is no upper earnings limit for employer NI -- unlike employee NI, which drops to 2% above GBP 50,270, employer NI continues at 15% on all earnings above the secondary threshold, no matter how high the salary. Each employee is treated separately for secondary threshold purposes, so if you have ten employees on GBP 6,000 each, you calculate NI on (GBP 6,000 -- GBP 5,000) × 10 = GBP 10,000 × 15% = GBP 1,500 total employer NI.

Can sole directors claim Employment Allowance?

No -- sole director companies (where the only employee is the director, or the only employees are also directors) are excluded from claiming Employment Allowance, regardless of their employer NI liability or business size. This is to prevent abuse of the allowance by one-person companies. If you are a sole director company, you cannot claim the GBP 10,500 Employment Allowance. However, if you employ even one other person (a member of staff who is not a director), you may qualify for Employment Allowance, subject to other eligibility criteria (employer NI liability below GBP 100,000 in the previous year). This exclusion is designed to target relief at businesses with multiple employees.

Is employer National Insurance payable on benefits in kind?

Yes -- Class 1A National Insurance at 15% is payable on the taxable value of benefits in kind. For example: a company car with a GBP 30,000 list price and CO₂ emissions of 120g/km has a benefit in kind value of 32% × GBP 30,000 = GBP 9,600 per year. Class 1A NI: 15% × GBP 9,600 = GBP 1,440 per year. The employee also pays income tax on GBP 9,600 through their PAYE code. Some benefits are exempt from Class 1A NI: employer pension contributions, workplace nursery provision, Cycle to Work scheme equipment (within limits), and approved working-from-home payments (up to GBP 6 per week without evidence).

What is the Apprenticeship Levy and how does it interact with employer NI?

The Apprenticeship Levy is a separate payroll tax (not National Insurance) of 0.5% on total payroll costs, payable by employers with an annual payroll bill above GBP 3 million. It is calculated on all employee earnings without a threshold. The Apprenticeship Levy is independent of employer NI -- you pay both 15% Class 1 NI on earnings above GBP 5,000 and 0.5% Apprenticeship Levy on all payroll. However, employers can claim an annual allowance of GBP 15,000 against the levy, so the effective cost is 0.5% on earnings above GBP 3 million less the GBP 15,000 allowance. Employers must budget for both employer NI and Apprenticeship Levy if their payroll exceeds the GBP 3 million threshold.

How does employer National Insurance apply to zero-hours and part-time workers?

Employer NI applies to all employees regardless of hours worked, as long as they earn above the secondary threshold (GBP 5,000 per year or GBP 417 per month). A zero-hours worker paid GBP 300 in month 1 and GBP 200 in month 2 costs the employer nothing in NI (below GBP 417 monthly threshold). But if paid GBP 600 in month 3, the employer owes 15% × (GBP 600 -- GBP 417) = 15% × GBP 183 = GBP 27.45. Part-time workers on GBP 15,000 per year attract the same 15% employer NI on (GBP 15,000 -- GBP 5,000) = GBP 1,500 × 15% = GBP 225, as full-time employees on the same salary. The lower threshold (GBP 5,000) has significantly increased the number of part-time workers subject to employer NI.

What are the penalties for non-payment or late payment of employer National Insurance?

Employer NI must be paid to HMRC by the 22nd of the month following the payroll month (or 19th by cheque). Late payment incurs automatic late payment penalties: 5% of the tax due if 12 months late, 10% if 18 months late, and 15% if 24 months late. Interest is charged at Bank of England base rate plus 2.5% per annum on all unpaid amounts. If you are more than 12 months late with PAYE and employer NI payments, HMRC may demand the full amount immediately. Employers can apply for a Time to Pay arrangement to spread payment over up to 12 months and may be able to get penalties reduced if they have a reasonable excuse. The RTI (Real-Time Information) system means HMRC knows immediately if a payment is missing.

Are directors' fees subject to employer National Insurance?

Directors can draw income in several ways: salary, dividends, or a combination. Salary (Class 1 earnings) is subject to 15% employer NI above the secondary threshold (GBP 5,000 per year), exactly like employee wages. Dividends are not subject to employer NI because they are distributions of profit, not earnings -- they are already subject to corporation tax and dividend tax on the director. A sole director company paying itself GBP 12,500 salary incurs 15% × (GBP 12,500 -- GBP 5,000) = GBP 1,125 in employer NI. The same company paying GBP 5,000 salary (no employer NI) and GBP 7,500 in dividends (no employer NI) avoids employer NI entirely. However, both salary and dividends are subject to Class 2 and Class 4 self-employed NI if the director is also a self-employed partner.

Related Guides

Employment Allowance GBP 10,500

Eligibility, sole director exclusion, claim process

Salary Sacrifice Explained

Pension, cycle-to-work, EV schemes and NI savings

Class 1A and P11D Benefits

Company cars, medical, benefits in kind NI

Self-Employed NI

Class 2 and Class 4 NI rates and thresholds

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About the author

Emma Clarke

UK Tax Writer

Emma Clarke has been writing about UK personal tax since 2018, with a particular focus on Self Assessment, PAYE coding and the practical mechanics of how HMRC actually applies the rules to ordinary salaries. Her work concentrates on translating the dense language of HMRC manuals and Finance Act schedules into worked examples that show, pound by pound, how income tax and National Insurance reduce a gross salary to the figure that lands in a UK bank account. Emma covers the full PAYE lifecycle: tax codes (1257L, BR, K codes, emergency codes), the Marriage Allowance, the High Income Child Benefit Charge, salary sacrifice arrangements and their effect on pensionable pay, the Apprenticeship Levy, and the differences between the rUK and Scottish income-tax regimes. She is particularly interested in the edge cases that catch PAYE employees out — the £100,000 personal-allowance taper, the 60% effective marginal rate it creates, and the interaction between student-loan plans and pension contributions. Every figure in Emma's articles is verified against the current HMRC rates pages and worked through a Self Assessment calculation by hand before publication. She writes to CalcHub's editorial standards: primary-source citations, plain English, no promotional language, and clear "this is general information, not financial advice" disclaimers where appropriate.

Personal-finance writer since 2018
UK tax specialism — PAYE, Self Assessment, National Insurance
Writes to CalcHub editorial standards (primary-source citation, annual review)

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Disclaimer: Employer NI rates and thresholds are set annually. This guide reflects the 2026/27 position following the April 2025 changes. Employment Allowance eligibility rules may change. Always verify current rates at gov.uk/employer-national-insurance-contributions and consult a payroll professional or accountant for advice specific to your business.