Employer National Insurance: The Complete UK Guide

Employer National Insurance stands at 15% from 6 April 2026, the highest rate in over a decade, and the Secondary Threshold that triggers the first payment dropped to £5,000 a year ^[1]. For every employee on payroll earning above that figure, the employer pays a percentage of their earnings directly to HMRC, in addition to the contributions the employee makes from their own wages.

This matters because employer National Insurance is not deducted from pay. It sits entirely on the employer's side of the calculation, meaning it raises the true cost of employment above the salary figure on every offer letter. A £30,000 annual salary carries more than £3,700 of employer National Insurance on top, and that number rises with every pay rise.

This guide covers how employer National Insurance works, how to calculate it, which categories of employee attract a zero rate, what Employment Allowance does, and how HMRC-recognised payroll software handles the reporting.

Key takeaways

• Employer National Insurance rose from 13.8% to 15% on 6 April 2026 ^[1].
• The Secondary Threshold is £5,000 per year, down from £9,100 before April 2025 ^[2].
• Employees under 21 and apprentices under 25 attract zero employer NI up to £50,270 per year ^[6].
• Employment Allowance is £10,500 per year and offsets employer NI for eligible employers ^[8].
• Directors are assessed on an annual earnings period, not a weekly or monthly one ^[11].

What employer National Insurance is

Employer National Insurance Contributions (employer NICs) are a payroll tax paid by the employer to HMRC on top of an employee's wages. They are separate from the employee's own National Insurance deductions, which are taken from the employee's gross pay ^[3].

HMRC classes employer NICs as secondary Class 1 contributions, to distinguish them from the primary Class 1 contributions paid by the employee ^[4]. Both flow through the PAYE payroll system and are reported to HMRC via the Full Payment Submission on or before each payday.

Class 1 National Insurance: employer and employee together

Class 1 is the category that applies to employed workers. It covers both the employee-side (primary Class 1) and the employer-side (secondary Class 1) contributions ^{[4] [5]}. In practice, the payroll software calculates both figures in a single pass and the employer sends both to HMRC as one integrated submission via the FPS on or before each payday ^[14].

The key difference between employer and employee NI

Employer NI is charged on a different earnings band to employee NI. Employees start contributing to National Insurance once their pay crosses the Primary Threshold of £12,570 per year. Employers start paying from the Secondary Threshold of £5,000 per year ^{[2] [1]}. This means there is a band between £5,000 and £12,570 where the employer pays National Insurance but the employee does not.

Employer NI rates and thresholds

The rate at which employer National Insurance is calculated depends on the NI category letter assigned to the employee. For most workers, the standard secondary rate applies.

The standard 15% rate

The standard employer NI rate for the 2026-27 tax year is 15% on all earnings above the Secondary Threshold ^{[1] [16]}. This rate applies to employees in category A (standard worker), category J (deferred NI), category C (over State Pension age), and others where no zero-rate relief applies.

The rate rose from 13.8% on 6 April 2026, ending a period during which the standard rate had remained stable at 13.8% since April 2011 ^[7].

The thresholds that define when employer NI is due

The table below sets out the 2026-27 employer NI thresholds. Each figure applies across weekly, monthly and annual pay periods.

Sources: ^{[1] [2]}.

Calculating employer NI contributions

HMRC's preferred method for employer NI is the exact percentage method rather than the tables method. All modern HMRC-recognised payroll software applies the exact percentage method automatically, but employers running payroll in-house need to understand the steps to verify their figures.

The calculation steps

HMRC uses a nine-step exact percentage method. The key steps for a standard category A employee are ^{[5] [15]}:

1. Earnings up to ST: record on payroll, no NIC due. Stop if earnings do not exceed ST.
2. Earnings from ST to LEL: enter on payroll record, employer NIC applies at 15%.
3. Earnings from LEL to PT: enter on payroll record, employer NIC applies at 15%.
4. Earnings from PT to FUST/IZUST (£25,000): employer NIC at 15%.
5. Earnings from FUST/IZUST to UEL (£50,270): employer NIC at 15%.
6. Earnings above UEL: employer NIC at 15%.

Steps 2 to 5 are combined before rounding. The rounding rule from legislation: third decimal place 5 or less, round down; 6 or more, round up. Directors are the one exception: they are calculated on an annual cumulative basis rather than period by period.

Worked examples

Standard category A employee, monthly pay:

An employee earns £3,500 per month (monthly ST = £417, monthly FUST = £2,083).

• Steps 2 to 4 combined (ST to FUST): £2,083 minus £417 = £1,666 at 15% = £249.90 (unrounded)
• Step 5 (FUST to UEL): £3,500 minus £2,083 = £1,417 at 15% = £212.55 (unrounded)
• Combined and rounded: £249.90 plus £212.55 = £462.45 employer NIC.

Under-21 category M employee, weekly pay (from HMRC official worked example):

A 19-year-old earns £1,004 per week (weekly UEL/UST = £967). The zero rate applies up to the UST; only earnings above £967 attract employer NIC at 15% ^{[5] [6]}.

• Steps 2 to 5 (ST to UST): £0 employer NIC (zero rate applies throughout).
• Step 6 (above UEL): £1,004 minus £967 = £37 at 15% = £5.55 employer NIC.

The employer saves £132.45 compared to what they would owe on a standard category A employee earning the same wage (£135.60 minus £5.55 using the same earnings).

Both figures sit entirely on the employer and are reported to HMRC via the FPS on or before each payday ^{[14] [15]}.

Employer NI category letters and zero-rate reliefs

HMRC assigns every employee an NI category letter. The letter determines both the employee-side and employer-side rates. For most employees the letter is A. Certain categories carry a zero employer rate up to a defined threshold, a relief that directly reduces the employer's NI bill ^[6].

The table below summarises the main employer-side category letters and their rates.

Sources: ^{[1] [6]}.

Freeport and Investment Zone are two legally separate relief schemes with distinct category letters. FUST and IZUST share the same value (£25,000 per year) but cannot be used interchangeably in RTI submissions.

Zero-rate reliefs in detail

Employers paying employees in categories M, H, V or Z pay no secondary Class 1 NI on the first £50,270 of annual earnings. Only earnings above that Upper Secondary Threshold attract the 15% rate ^{[6] [1]}.

Veterans (category V) qualify for the zero rate for 12 consecutive months from the first day of the veteran's first civilian employment after leaving the regular armed forces ^[12]. Freeport employees (categories F, I, S, L) and Investment Zone employees (categories N, E, K, D) each qualify for up to 36 months under their respective schemes, provided the employee spends at least 60% of their working time in the relevant special tax site ^[13].

These reliefs are not applied automatically unless the correct NI category letter is set in the payroll record. Payroll bureaux managing multiple employer schemes can apply these reliefs consistently across all clients through a multi-client payroll dashboard, reducing the risk of a miscoded category generating an overpayment.

Employment Allowance

Employment Allowance allows eligible employers to reduce their employer NI liability by up to £10,500 per tax year ^[8]. The allowance offsets the employer's cumulative Class 1 NI bill. Any unused portion of the allowance at the end of the tax year does not carry forward.

The allowance is claimed through the Employer Payment Summary in the payroll cycle and applied incrementally each pay period until the £10,500 is exhausted.

Eligibility for Employment Allowance

Most employers are eligible provided their total Class 1 NI liability in the previous tax year was below £100,000 ^{[9] [8]}. Since the removal of the former £100,000 eligibility cap in April 2025, and the simultaneous increase of the allowance from £5,000 to £10,500, more employers benefit from a larger offset than at any previous point in the allowance's history.

Connected companies and charities within the same group share one allowance. Only one entity in the group may claim it, and the selection should be made at the start of the tax year.

The single-director company restriction

A limited company cannot claim Employment Allowance if the sole director is also the only employee whose earnings trigger a secondary Class 1 NI liability ^{[17] [9]}. This rule affects many single-person trading companies that pay a director's salary and dividends. Once the company hires a second employee whose earnings exceed the Secondary Threshold, it becomes eligible to claim.

For small businesses running payroll through a UK payroll engine, the eligibility check and EPS claim can be automated at the point of submission.

Class 1A and Class 1B National Insurance

Beyond the Class 1 contributions on wages, employers also face secondary NI on certain non-cash benefits and formal settlements.

Class 1A on benefits in kind

Class 1A NI is charged at 15% on the cash-equivalent value of benefits in kind provided to employees or directors ^{[10] [2]}. Common examples include private medical insurance, company cars and employer-provided gym memberships. The liability is calculated once a year on the P11D values and paid by 19 July after the end of the tax year.

Class 1A also applies to termination awards exceeding £30,000 and to non-contractual sporting testimonial payments exceeding £100,000. These are reported in real time via the FPS rather than through the annual P11D cycle ^[5].

Class 1B on PAYE settlement agreements

Class 1B NI arises where an employer has entered a PAYE Settlement Agreement (PSA) with HMRC, covering minor or irregular benefits that are not included on individual P11Ds. The Class 1B rate for 2026-27 is 15% ^{[2] [5]}. The PSA return and payment are due by 19 October each year.

Employer NI for directors

Directors are subject to a different NI calculation to regular employees. HMRC requires that directors' NI be calculated on an annual earnings period, regardless of how often they are paid ^[11]. This rule prevents a director from avoiding NI by timing a large bonus late in the tax year.

The annual basis method

Under the annual basis, employer NI is calculated on the director's total earnings for the year against annual thresholds when the final payment of the year is processed. This means employer NI may be nil for most months and then a larger amount arises in the final pay run ^{[11] [5]}.

The pro-rata method for mid-year appointments

A director appointed part way through the tax year uses pro-rated thresholds. The annual Secondary Threshold and Upper Earnings Limit are scaled by the number of weeks remaining in the tax year ^{[11] [5]}. For example, a director appointed with 18 weeks of the tax year remaining would use a pro-rata Secondary Threshold of approximately £1,731 (£5,000 divided by 52, multiplied by 18).

The pro-rata method ensures the director's NI is neither over- nor under-collected in a shortened employment period. SME payroll platforms apply the correct method automatically when a director-employee record is configured with the appointment date.

Reporting employer NI through payroll

Employer NI is reported to HMRC as part of every Full Payment Submission. The FPS must reach HMRC on or before each payday ^{[14] [15]}. The total NI liability, broken down by employee and NI category, flows through the FPS data fields.

Payroll software that carries the HMRC Recognised badge submits the FPS automatically and applies the correct rates for each NI category letter, including the zero-rate reliefs, without manual configuration at each pay run. For payroll bureaux managing dozens or hundreds of clients, automated NI calculation and submission removes a significant source of manual error and reduces the volume of corrections processed through the Employer Payment Summary.

Conclusion

Employer National Insurance at 15% on earnings above £5,000 is now the single largest statutory payroll cost for most UK businesses. The combination of the higher rate and the lower Secondary Threshold means the employer-side NI bill is materially larger than before April 2025, and the benefit of zero-rate categories and Employment Allowance is correspondingly more valuable.

The employer NI framework is also one of the most rule-dense areas of payroll. Category letters, annual earnings periods for directors, connected-company allowance rules, and phased reliefs for veterans and freeport workers all require careful configuration. A payroll API built to handle each of these cases correctly reduces the compliance risk that comes with manual interpretation of HMRC rules.

Frequently asked questions

What is the current employer National Insurance rate in the UK?

The standard employer National Insurance rate is 15% on all employee earnings above the Secondary Threshold of £5,000 per year ^[1]. This rate has applied from 6 April 2026 and is set to continue until at least 5 April 2027. The rate rose from 13.8%, having remained at that level since April 2011 ^[7].

At what salary does an employer start paying National Insurance?

Employer National Insurance starts when an employee earns more than the Secondary Threshold. For the 2026-27 tax year, that threshold is £5,000 per year, £417 per month, or £96 per week ^[2]. Below that level, no employer NI is due, though the earnings still need to be recorded on the payroll if they are at or above the Lower Earnings Limit of £6,708 per year, as they count towards the employee's State Pension qualifying record.

Can an employer avoid paying National Insurance on some employees?

Certain categories of employee attract a zero employer NI rate up to a defined threshold. Employees under 21 (category M) and apprentices under 25 (category H) generate no employer NI on the first £50,270 of annual earnings ^[6]. Veterans in their first 12 months of civilian employment qualify under category V on the same earnings cap ^[12]. These reliefs are not automatic: the correct NI category letter must be set in the payroll record before the first pay run.

Does Employment Allowance replace employer National Insurance entirely?

Employment Allowance reduces an eligible employer's Class 1 National Insurance liability by up to £10,500 per tax year ^[8], but it does not eliminate it entirely for most employers. An employer with a £20,000 annual employer NI bill would pay £9,500 after applying the full allowance. Single-director companies where the director is the only employee earning above the Secondary Threshold cannot claim the allowance ^[17].