How National Insurance Works in 2025/26
National Insurance (NI) is a tax on earnings paid by employees, employers and the self-employed. It funds the State Pension, the NHS, Jobseeker's Allowance and other benefits. Unlike Income Tax, NI is not calculated on total annual income alone — it operates on weekly or monthly earnings and has separate rules for employees and employers.
Employee National Insurance
As an employee, you pay NI on your earnings above the Primary Threshold (PT) of £12,570 per year. The rate is 8% on earnings between £12,570 and £50,270 (the Upper Earnings Limit), and 2% on any earnings above £50,270. Your NI contributions are deducted from your gross pay before you receive your salary — they directly reduce your take-home pay.
Employer National Insurance
Your employer pays a separate NI charge on your wages. This is an additional cost to the business — it does not come out of your salary. From April 2025, the employer NI rate increased to 15% (from 13.8%) and the Secondary Threshold (ST) was reduced to £5,000/year (from £9,100). This means employers now pay NI on a greater portion of each employee's salary, and at a higher rate — significantly increasing the cost of employment.
The April 2025 Changes and Their Impact
The changes announced in the October 2024 Autumn Budget took effect from 6 April 2025. The combination of a higher rate (15%) and a lower threshold (£5,000) means employer NI costs rose substantially. For a worker earning £35,000, employer NI increased by over £900 per year compared to 2024/25. To partially offset this, the Employment Allowance was raised to £10,500 (from £5,000) — available to eligible small employers to reduce their overall employer NI bill.
Total Employment Cost
The true cost to an employer of hiring someone is the employee's salary plus the employer NI contribution. At a £35,000 salary in 2025/26, the total employment cost is approximately £38,750 — the employer pays an additional £3,750 in NI on top of the gross salary. This is an important figure for businesses when budgeting headcount.
NI Rates at a Glance
How the key thresholds and rates compare between 2024/25 and 2025/26.
| Rate / Threshold |
2024/25 |
2025/26 |
| Employee rate (PT to UEL) | 8% | 8% |
| Employee rate (above UEL) | 2% | 2% |
| Primary Threshold (PT) | £12,570 | £12,570 |
| Upper Earnings Limit (UEL) | £50,270 | £50,270 |
| Employer rate (above ST) | 13.8% | 15% |
| Secondary Threshold (ST) | £9,100 | £5,000 |
| Employment Allowance | £5,000 | £10,500 |
Worked Examples (2025/26)
These figures use the 2025/26 rates and are rounded to the nearest pound.
£25,000 salary
Employee NI (8% on £12,430)£994
Employer NI (15% on £20,000)£3,000
Total NI£3,994
Total employment cost£28,000
£50,270 salary (UEL)
Employee NI (8% on £37,700)£3,016
Employer NI (15% on £45,270)£6,791
Total NI£9,807
Total employment cost£57,061
£80,000 salary
Employee NI (8%+2%)£3,616
Employer NI (15% on £75,000)£11,250
Total NI£14,866
Total employment cost£91,250
Important Considerations
Employer NI is not deducted from your salary
Employer National Insurance is a cost borne entirely by the business. It is paid on top of your gross salary and has no direct effect on your take-home pay. However, it does affect the total cost of employing you — which can influence hiring decisions, salary negotiations and pay review outcomes.
Employment Allowance — up to £10,500 off for eligible employers
Small employers can claim the Employment Allowance to reduce their employer NI bill by up to £10,500 per tax year (2025/26). It applies per business, not per employee. Sole directors with no other employees, and employers whose secondary (employer) NI liability was £100,000 or more in the previous year, are not eligible. The Employment Allowance is not reflected in this calculator as it is a business-level relief.
Frequently Asked Questions
What changed with employer NI in April 2025?
From 6 April 2025, the employer NI rate increased from 13.8% to 15%, and the Secondary Threshold (the earnings level at which employer NI kicks in) was reduced from £9,100 to £5,000 per year. Both changes took effect simultaneously, meaning employers pay NI on more of each employee's salary and at a higher rate. To cushion the blow for small businesses, the Employment Allowance was simultaneously raised from £5,000 to £10,500 per year.
Is NI the same in Scotland?
Yes. National Insurance is a UK-wide tax and is not devolved to Scotland. The rates and thresholds are identical across England, Scotland, Wales and Northern Ireland. Scottish taxpayers pay the same NI as their counterparts in the rest of the UK, even though they may pay different rates of Income Tax. The differences in Scottish Income Tax bands do not affect NI at all.
What is the Employment Allowance?
The Employment Allowance allows eligible employers to reduce their employer National Insurance bill by up to £10,500 per tax year (2025/26). It is claimed through PAYE and reduces the monthly employer NI liability until the allowance is used up. Most small and medium-sized employers qualify, but sole directors who are the only employee of their company, and employers whose employer NI liability exceeded £100,000 in the previous tax year, are excluded. It applies at the business level — not per employee — so it does not affect this calculator's results.
Do I still pay NI if I earn below the threshold?
No employee NI is due on earnings below the Primary Threshold of £12,570 per year (equivalent to £1,047.50 per month or £242 per week). However, there is a lower band — between the Lower Earnings Limit (£6,396/year) and the Primary Threshold — where earnings are treated as if NI were paid. This protects your entitlement to the State Pension and contributory benefits without any actual deduction from your pay. Earnings below the Lower Earnings Limit attract no NI and build no entitlement.
How does NI affect my State Pension?
You need 35 qualifying years of National Insurance contributions to receive the full new State Pension (£221.20 per week in 2025/26). A minimum of 10 qualifying years is needed to receive any State Pension at all. A qualifying year is any tax year in which you earned above the Lower Earnings Limit (£6,396/year in 2025/26), were credited with NI (e.g. while claiming certain benefits or receiving Child Benefit for a child under 12), or made voluntary NI contributions. You can check your NI record and State Pension forecast via the GOV.UK Personal Tax Account.
Why is my employer NI higher than my employee NI?
From April 2025, employer NI is charged at 15% on earnings above £5,000, while employee NI is charged at 8% on earnings above £12,570. The combination of a lower threshold and a higher rate means employer NI substantially exceeds employee NI for most salary levels. For example, on a £35,000 salary, an employee pays around £1,794 in NI while the employer pays around £4,500. This makes employer NI a significant business cost — roughly 12–15% of total salary for a typical earner — and a major factor in the overall cost of employment.
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