National Insurance Explained — 2025/26 Guide

National Insurance (NI) is a tax on earnings that funds state benefits including the State Pension, NHS, and statutory pay entitlements. It's separate from income tax — both come out of your pay via PAYE.

Employee Class 1 NI Rates — 2025/26

The main rate was cut from 10% to 8% in April 2024. Scotland and Wales use the same NI rates as England.

Employer NI Contributions 2025/26

Your employer pays 13.8% employer NI on your earnings above £5,000 (the Secondary Threshold, reduced from £9,100 from April 2025). This is a separate cost to your employer — it doesn't come out of your pay directly, but it affects what employers can afford to pay in wages.

Real-World NI Examples

• £26,000 salary: NI = 8% × £13,430 = £1,074/year (£89.50/month)
• £40,000 salary: NI = 8% × £27,430 = £2,194/year (£183/month)
• £60,000 salary: NI = (8% × £37,700) + (2% × £9,730) = £3,211/year (£268/month)

Use our calculator for your exact NI figure →

What Does NI Fund?

• State Pension: You need 35 qualifying years of NI to get the full new State Pension (£221.20/week in 2025/26). Gaps in your record can be voluntarily filled.
• NHS: A portion of NI receipts funds the National Health Service.
• Statutory Maternity Pay (SMP)
• Statutory Sick Pay (SSP)
• Contribution-based Jobseeker's Allowance

NI and Salary Sacrifice

One little-known benefit of salary sacrifice pension schemes: contributions reduce your NI-liable earnings. For example, if you sacrifice £2,000 of salary into your pension on a £35,000 income, your NI is calculated on £33,000 instead of £35,000 — saving around £160 in employee NI per year. Your employer also saves NI, and many pass some of that saving into your pension.

Self-Employed NI Rates