Jane Dotson
The National Insurance (NI) rate is a tax on income that is separate from income tax. In 2024, the UK government announced cuts to the National Insurance rate for employees, reducing it from 12% to 10% in January and then to 8% in April. These cuts aimed to increase employees' take-home pay. However, in the 2024 Autumn Budget, the Chancellor announced a National Insurance increase for the 2025-26 tax year, with the main rate for employees set at 8% and the upper earnings limit at 2%. Employers' National Insurance contributions have also been impacted, with the rate increasing from 13.8% to 15% from April 2025. These changes are expected to raise billions in revenue for public finances.
| Characteristics | Values |
|---|---|
| Employee National Insurance class 1 rate | 10% |
| Rate paid by employers | 15% |
| Main rate of employee National Insurance | 8% |
| Upper earnings limit | 2% |
| Primary threshold | £1,048 monthly or £242 weekly |
| Upper earnings limit | £4,189 monthly or £967 weekly |
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What You'll Learn
National Insurance contribution rates for employees
National Insurance is a tax on income. Employees pay Class 1 National Insurance contributions on their earnings. As of January 2024, the rate of Class 1 NICs is 10% on earnings between £12,570 and £50,270 per annum. Earnings above £50,270 per annum are taxed at 2%.
For the 2024-25 tax year, the main rate of employee National Insurance is 10%. This rate applies to earnings above the primary threshold of £1,048 per month or £242 per week. Employers pay secondary Class 1 NICs on employee earnings above the secondary threshold of £9,100 per year (£758 per month or £175 per week) at a rate of 13.8%.
From April 2025, the rate of secondary Class 1 NICs will increase to 15%. The primary threshold will be increased to £125 per week, but the weekly threshold for employee Class 1 NICs will remain at £242, and the upper earnings limit will stay at £967 per week. This means that there will be no change to the amounts of NI an employee pays in 2025-26 compared to the 2024-25 tax year. The main rate of employee National Insurance for 2025-26 will be 8%.
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National Insurance contribution rates for employers
National Insurance contributions (NICs) are a tax on income. There are differences in the way income tax and NICs are levied. Income tax is charged on all income, including earnings, pension, investment, property, and dividend income. On the other hand, NICs are only charged on earnings from employment or profits from self-employment.
For the 2024-25 tax year, employers paid NICs at a rate of 13.8% above the secondary threshold of £9,100 per year. Employers do not pay any NICs if their employees earn below the secondary threshold. The NICs paid by employers are known as secondary Class 1 NICs.
From April 2025 onwards, the rate paid by employers will increase to 15%. This will result in an increase in the amount of NICs paid for each employee. The increase in the NICs rate is expected to raise £25 billion for public finances.
To reduce their NICs liability, employers can claim the employment allowance. For the 2025-26 tax year, the employment allowance has been increased to £10,500, up from £5,000 in the previous year. Businesses with Class 1 National Insurance liabilities of less than £100,000 in the previous tax year can claim the employment allowance. The allowance reduces the NICs payable each time payroll is run until the full allowance is utilized or the tax year ends.
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National Insurance thresholds
National Insurance contributions (NICs) are a tax on income. NICs are levied for each earnings period (typically monthly or weekly) without reference to previous pay or NIC deductions. This is in contrast to income tax, which is levied on annual income. NICs are only charged on earnings from employment or profits from self-employment, whereas income tax is levied on all income, including earnings, pension, investment, property, and dividend income.
For the 2024-25 tax year, NICs were paid at 13.8% above the secondary threshold of £9,100 per year (£758 per month or £175 per week). Employers do not pay any National Insurance if their employees earn below the secondary threshold. The primary threshold for this tax year was £1,048 per month or £242 per week, and the upper earnings limit was £4,189 per month or £967 per week.
In January 2024, the employee National Insurance class 1 rate was reduced from 12% to 10%. This reduction took effect from 6 January 2024. As a result, an employee earning £50,000 per year would pay £3,743 in NICs, as opposed to £4,492 under the previous rate of 12%. This change resulted in an annual saving of £749 or £62 per month.
For the 2025-26 tax year, the main rate of employee National Insurance is 8%, and the upper earnings limit is 2%. The National Insurance rate paid by employers will increase from 13.8% to 15%. The secondary threshold for this tax year has been reduced from £9,100 to £5,000 per year. The employment allowance has been increased to £10,500, up from £5,000 in the previous tax year.
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National Insurance rate changes
National Insurance is a tax on income, but it is different from income tax. While income tax is levied on all income, including earnings, pension, investment, property, and dividend income, National Insurance contributions (NICs) are only levied on earnings from employment or profit from self-employment.
In November 2023, Jeremy Hunt announced a reduction in the employee National Insurance Class 1 rate from 12% to 10%, effective from 6 January 2024. This meant that every employee paying NIC would see an increase in their take-home pay. For example, an employee earning £50,000 per year would pay around £4,492 in NIC under the previous 12% rate. From January 2024, this would reduce to £3,743 per year, resulting in an annual saving of £749 or £62 per month.
In April 2024, the main rate was further reduced from 10% to 8%. As a result of these employee rate cuts, NICs are expected to be the second biggest revenue raiser, after VAT, for 2024-25.
Looking ahead to the 2025-26 tax year, the Chancellor, Rachel Reeves, announced a National Insurance increase and a reduction in the threshold at which employers start paying it. From April 2025, the rate paid by employers will increase from 13.8% to 15%. This will result in an increase in the amount of National Insurance paid for each employee. The upper earnings limit will be 2%. The employment allowance has been increased to £10,500 for the 2025-26 tax year, up from £5,000 in 2024-25. These changes are intended to raise £25 billion for public finances.
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Calculating National Insurance payments
National Insurance is a tax on earnings and self-employed profits paid by employees, employers, and the self-employed. It contributes to funding various state benefits, such as the State Pension. There are several classes of National Insurance contributions that different parties are responsible for.
Class 1 NICs are paid by employees and employers on the employee's earnings. Class 1A and 1B NICs are paid by employers on employee benefits and expenses. Employers pay 0% on income below a certain threshold and 13.8% above that threshold.
For the 2024/2025 tax year, the primary threshold for Class 1 NICs is £242 per week. This is the point at which employees start to pay National Insurance. The secondary threshold, which is the point at which employers start to pay National Insurance, is £175 per week. The upper earnings limit, where the employee's rate of National Insurance reduces, is £967 per week.
To calculate National Insurance contributions for employees, the following rates are applied for the 2024/2025 tax year: 12% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above the upper earnings limit.
For employers, the rate for the 2024/2025 tax year is 13.8% on all employee earnings above the secondary threshold.
There are also several special cases and exemptions that employers need to be aware of. For example, company directors count as employees and are required to pay NI contributions on any income over £9,100. Employers can also save up to £1,000 in National Insurance per year by using a Salary Sacrifice pension scheme.
Calculating National Insurance contributions can be done manually using the above rates and thresholds, or automatically using online calculators and tables provided by HM Revenue and Customs (HMRC).
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Frequently asked questions
As of April 2024, the employee National Insurance rate is 8%.
Before April 2024, the employee National Insurance rate was 10%.
Before January 2024, the employee National Insurance rate was 12%.
There are 2 types of National Insurance for people who are self-employed, depending on their profits.
From April 2025, the National Insurance rate paid by employers will increase from 13.8% to 15%.
