National Insurance Explained — 2025/26
Updated for the 2025/26 tax year
National Insurance (NI) is a tax on earnings and self-employed profits. It funds the State Pension, NHS, and other benefits. Unlike income tax, NI has different classes depending on how you earn.
NI Classes & Rates for 2025/26
| Class | Who Pays | Rate | Threshold |
|---|---|---|---|
| Class 1 (Employee) | Employees | 8% / 2% | £12,570–£50,270 / above £50,270 |
| Class 1 (Employer) | Employers | 13.8% | Above £9,100 |
| Class 2 | Self-employed | £3.45/week | Profits above £12,570 (voluntary below) |
| Class 3 | Voluntary | £17.45/week | To fill gaps in NI record |
| Class 4 | Self-employed | 6% / 2% | £12,570–£50,270 / above £50,270 |
Employee NI in Detail
As an employee, you pay 8% on earnings between £12,570 and £50,270, and 2% on everything above £50,270. There is no NI on the first £12,570 (the Primary Threshold, aligned with the Personal Allowance).
Example: On a £40,000 salary, employee NI = (£40,000 − £12,570) × 8% = £2,194.
Employer NI in Detail
Employers pay 13.8% on earnings above £9,100 (the Secondary Threshold). This is a hidden cost of employment.
Example: On a £40,000 salary, employer NI = (£40,000 − £9,100) × 13.8% = £4,264. The total cost to the employer is £44,264.
What NI Pays For
- State Pension — the biggest portion
- NHS — healthcare funding
- Jobseeker’s Allowance — unemployment benefits
- Employment and Support Allowance — sickness benefits
- Maternity Allowance
- Bereavement benefits
NI Credits & Qualifying Years
You need 35 qualifying years of NI to get the full State Pension (£230.25/week in 2025/26). A minimum of 10 qualifying years is needed to get any State Pension at all.
You get NI credits (count toward qualifying years) if you:
- Claim Child Benefit for a child under 12
- Receive Jobseeker’s Allowance or Universal Credit
- Are a carer receiving Carer’s Allowance
- Are on jury service or approved training
Filling Gaps in Your NI Record
Check your NI record at gov.uk/check-national-insurance-record. If you have gaps, you can pay voluntary Class 3 contributions (£17.45/week, ~£907/year). The deadline to fill gaps from 2006/07 onwards has been extended — check gov.uk for the latest deadline. Filling a single gap year could increase your State Pension by about £340/year for life — a very good return on investment.
Practical Tips
- Salary sacrifice reduces your NI bill — pension contributions via salary sacrifice are not subject to employee or employer NI.
- Self-employed people pay less NI than employees on equivalent income, but also get fewer benefits.
- Directors pay NI on an annual basis (not weekly/monthly), which can affect the timing of payments.
- There is no NI on investment income, rental income, or pension income — only on earnings and self-employed profits.