National Insurance was once the tax that no one paid attention to. In the last three years it has been one of the most-changed taxes in the system — and the changes have moved in opposite directions for employees, employers, and the self-employed.
Where the main rates sit in 2026/27
Employees (Class 1)
- Main rate: 8% on earnings between £12,570 and £50,270.
- Higher earnings: 2% above £50,270.
- The employee main rate was cut from 12% to 10% in January 2024, then to 8% in April 2024.
Employers (Class 1 Secondary)
- Main rate: 15% (up from 13.8%) from April 2025.
- Secondary Threshold: £5,000 (down from £9,100) from April 2025.
- Employment Allowance: £10,500 (up from £5,000) for qualifying employers.
Self-employed (Class 2 and Class 4)
- Class 2 (flat-rate): effectively abolished from April 2024 — most self-employed workers now build state benefit entitlement through Class 4 alone, with voluntary Class 2 available for those with profits below the small profits threshold.
- Class 4 main rate: 6% on profits between £12,570 and £50,270.
- Class 4 higher rate: 2% on profits above £50,270.
The big shift: from employee to employer cost
The net direction of travel is clear. Employees and the self-employed pay less NIC; employers pay substantially more. The reduction of the Secondary Threshold from £9,100 to £5,000 means employers now pay 15% on the slice between £5,000 and £9,100 that was previously NIC-free — an extra £615 per employee per year before any other costs.
For a 25-employee business with average wages of £35,000, the April 2025 changes added roughly £24,000 to annual employer NIC. For high-headcount sectors — hospitality, care, retail — the impact is even larger.
Employment Allowance — the partial offset
The Employment Allowance was increased to £10,500 and the previous £100,000 secondary contributions cap was scrapped. Many medium-sized employers now qualify who previously did not. Single-director companies still cannot claim it (the director must not be the sole employee). Our payroll team reviews eligibility for every client at the start of each tax year.
Hidden traps for the self-employed
The end of mandatory Class 2 NIC means most self-employed workers no longer pay a flat weekly charge. Good news, but with one quirk: people with very low profits who previously paid Class 2 voluntarily to protect their state pension record now need to make a conscious voluntary Class 2 election. Failing to do so can create gaps in the state pension record that emerge only at retirement.
NIC and salary sacrifice
Salary sacrifice arrangements (typically into pensions) avoid employee NIC and employer NIC on the sacrificed portion. With employer NIC now at 15%, the saving to the company is larger than ever. A £5,000 employer-funded pension contribution structured as salary sacrifice saves the company £750 in NIC versus paying it as salary. For owner-managed companies, this is now one of the most underused reliefs.
Directors' NIC — the annual basis
Directors' NIC is calculated on an annual basis rather than per pay period. This means a director who takes a low salary plus a one-off bonus will still get the full annual thresholds applied. Our tax planning service includes director NIC modelling for every owner-managed client.
Forecasting employer cost
The combined effect of higher employer NIC and lower Secondary Threshold means that the true cost of employment has risen materially since 2024. Any business hiring in 2026 should be using a "true cost" calculator that includes employer NIC, employer pension contributions (minimum 3% of qualifying earnings under auto-enrolment), apprenticeship levy where applicable, and holiday pay. Headline salary alone is misleading.
Cross-border workers (UK and UAE)
For PushDigits clients with workers split between our London and Dubai offices, the UK-UAE Double Taxation Agreement plus the relevant NIC framework determines who pays where. We coordinate this carefully with each client's HR function to avoid double charging.
Action checklist
- Re-run your payroll budget for 2026/27 using the £5,000 Secondary Threshold and 15% rate.
- Confirm Employment Allowance eligibility.
- Review salary sacrifice schemes — most should be made more aggressive.
- If you are self-employed with low profits, decide on voluntary Class 2 NIC each year.
Need help modelling the full employer cost impact? Speak to our payroll team for a free 2026/27 cost comparison.