What NI is and isn't
National Insurance is sometimes described as "a second income tax", but it's distinct from Income Tax in three important ways:
- It funds specific things. The National Insurance Fund pays the State Pension, contributory benefits (Jobseeker's Allowance, Employment and Support Allowance), and the NHS in part. Income Tax goes into general government revenue.
- It's earnings-only. NI applies to wages, salaries and self-employed profit — not investment income, dividends, or rental income.
- It has its own thresholds. The NI thresholds aren't the same as Income Tax bands, though for 2026/27 the main employee threshold (£12,570) and the Upper Earnings Limit (£50,270) happen to align with the personal allowance and higher-rate threshold.
Employee NI rates for 2026/27
Most UK employees pay Class 1 NI on the following structure:
| Earnings band | Annual range | NI rate |
|---|---|---|
| Below the Primary Threshold | £0 – £12,570 | 0% |
| Main rate | £12,571 – £50,270 | 8% |
| Above the Upper Earnings Limit | £50,271+ | 2% |
The rate drops from 8% to 2% above the UEL because higher earners are deemed to have reached the contribution level that already qualifies them for the State Pension and contributory benefits.
NI is non-cumulative
Unlike Income Tax under PAYE, National Insurance is calculated separately on each pay period in isolation. This is why a one-off bonus produces a NI deduction that's roughly proportional to the bonus size — there's no end-of-year "balancing" calculation that flattens the deduction over the year.
Categories matter
Your payslip shows a single-letter NI category. Most employees are on category A (standard rate). Other categories you might see:
- C — over State Pension age (no employee NI payable)
- H — apprentices under 25 (reduced employer NI)
- M — employees under 21
If you've recently crossed State Pension age, check that your payslip moved you onto category C — employers occasionally miss this.
Who pays NI besides employees
- Employers pay 15% on most earnings they pay above £5,000 a year per employee (the Secondary Threshold). This is "employer NI" and doesn't appear on your payslip, but it affects what an employer can afford to pay you.
- Self-employed pay Class 4 NI at 6% on profits between £12,570 and £50,270, then 2% above. Class 2 NI (a flat weekly amount) was abolished in April 2024.
- Voluntary contributions (Class 3) can be paid to fill gaps in your NI record if you've had years with low or no contributions — relevant for State Pension entitlement.