How it works
What National Insurance actually pays for
Although it looks like just another tax on your payslip, NI directly buys specific entitlements — most importantly your State Pension qualifying years. A full new State Pension requires 35 qualifying years of contributions, and you need at least 10 years to get any at all. It also feeds the NHS, Jobseeker's Allowance, Maternity Allowance, Bereavement Support and a handful of other contributions-based benefits.
Unlike Income Tax, NI does not stack with allowance tapers, savings allowances or Marriage Allowance. It's a separate calculation running in parallel.
Class 1: employees
For 2025/26, employees pay Class 1 NI on their gross pay above the Primary Threshold of £12,570 a year (£242/week, £1,048/month) and below the Upper Earnings Limit of £50,270 at 8%, and at 2% on anything above that.
| Band | Annual range | Rate |
|---|---|---|
| Below threshold | Up to £12,570 | 0% |
| Main band | £12,571 – £50,270 | 8% |
| Upper band | Above £50,270 | 2% |
Example: £40,000 salary
Earnings above threshold: 40,000 − 12,570 = £27,430.
27,430 × 8% = £2,194.40 a year Class 1 NI.
Employer also pays around £4,250 of Secondary Class 1 NI separately — not deducted from your pay but a real cost of employing you.
Example: £80,000 salary
Main band 50,270 − 12,570 = 37,700 × 8% = £3,016.
Upper band 80,000 − 50,270 = 29,730 × 2% = £594.60.
Total NI = £3,610.60 — around 4.5% of gross.
Class 2 and Class 4: self-employed
From April 2024, Class 2 NI (a flat £3.45/week) was effectively abolished for self-employed earning above the Small Profits Threshold — those people still get a qualifying year without paying. Anyone earning below it can still pay voluntary Class 2 (£3.50/week for 2025/26) to build entitlement.
Class 4 NI is the main bill. For 2025/26:
| Band | Annual profit | Rate |
|---|---|---|
| Below threshold | Up to £12,570 | 0% |
| Main Class 4 | £12,571 – £50,270 | 6% |
| Upper Class 4 | Above £50,270 | 2% |
Voluntary contributions (Class 3)
If you've got gaps in your NI record (career breaks, time abroad, very low earnings) you can plug them with Class 3 voluntary contributions — £17.75/week for 2025/26. A single year typically costs about £924 to buy and can add up to ~£330/year of State Pension for life. For many people, it's among the highest guaranteed returns available.
Check your NI record and forecast on gov.uk/check-state-pension before paying — not every gap is worth filling, and HMRC is running a temporary extension to buy gaps back to 2006.
Directors and irregular earnings
Company directors use an annual NI calculation rather than monthly. This matters if pay is bonus-heavy or irregular — an even salary throughout the year would hit the threshold 12 times, whereas a lump-sum director payment near year-end only touches the main band once. Smart directors smooth the pay to maximise the threshold.
Common misunderstandings
- "NI is part of Income Tax." — No, they're separate calculations with different thresholds and rules. You can have an Income Tax code of zero and still pay NI.
- "Pensioners pay NI." — No, employees over State Pension age don't pay Class 1 NI. Employer still pays its share.
- "NI is refundable if I leave the UK." — Not directly, but your contribution record is retained and usable for State Pension if you ever qualify (10-year minimum).
- "Second job gets double NI." — Each job gets its own threshold, so you may inadvertently pay more NI across two small jobs than one big one. HMRC reconciles at year-end via PAYE coding.