National Insurance (NI) is the second-largest deduction from most payslips, yet it behaves very differently from income tax. It has its own thresholds, it is calculated per employment, it does not recognise your personal allowance, and it forms the contribution record that decides your State Pension. Getting it right matters both for your take-home pay and for your retirement.
National Insurance rates for 2025/26
If you are employed, you pay Class 1 National Insurance on your gross earnings:
| Earnings band | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,570 – £50,270 | 8% |
| Above £50,270 | 2% |
The £12,570 figure is the primary threshold, where your liability begins. The £50,270 figure is the upper earnings limit, where the rate falls to 2%. These thresholds are frozen until 2028, so as wages rise, more of your pay is drawn into the 8% band — the same fiscal drag that affects income tax.
How to calculate your National Insurance
The calculation is straightforward once you know the bands:
- Take your gross annual pay.
- Subtract £12,570.
- Multiply the result by 8%, up to the £50,270 ceiling.
- Multiply anything above £50,270 by 2%.
On a £35,000 salary: £35,000 − £12,570 = £22,430. At 8%, that is £1,794.40 a year, or roughly £149 a month.
On a £60,000 salary: 8% on the first £37,700 (£50,270 − £12,570) gives £3,016, and 2% on the remaining £9,730 gives £194.60. Total: £3,210.60 a year.
Notice how the effective rate falls away at higher salaries, because the 2% band is so much cheaper than the 8% band.
Employer National Insurance
Employer NI is separate and does not come out of your pay. Employers pay 15% on earnings above the secondary threshold (currently £5,000 a year), with an allowance for smaller employers. This is a real cost on top of your salary — typically 15% of most of your pay — and it is why an employer’s true cost of hiring is significantly higher than the advertised salary.
When negotiating pay, this matters: an employer considering a £5,000 rise is actually committing to around £5,750 once employer NI is included.
National Insurance for the self-employed
The self-employed do not pay Class 1. Instead, for 2025/26:
- Class 4 NI — 6% on profits between £12,570 and £50,270, then 2% above £50,270.
- Class 2 NI — now voluntary for most people, but you can pay it to protect your State Pension record if your profits are low.
Class 4 is collected through Self Assessment rather than payroll, so it is paid once or twice a year rather than monthly. This is one reason self-employed people often underestimate their tax bill.
State Pension and qualifying years
National Insurance is not purely a tax — it is your contribution record. To receive the full new State Pension you generally need 35 qualifying years, and a minimum of 10 years to receive anything at all.
If you have gaps in your record — from time abroad, low earnings, or career breaks — you can often fill them by paying voluntary contributions. This is frequently excellent value: each extra qualifying year can add several pounds a week to your State Pension for life, and voluntary contributions are capped and time-limited.
Why NI is calculated per job
Unlike income tax, National Insurance is assessed separately for each employment. Each job has its own £12,570 threshold, but also its own 8% band. The result is that two part-time jobs can produce a different NI total from a single job paying the same combined amount — usually higher, because you pay 8% in each job rather than once. Our two jobs calculator models this precisely.
The combined marginal rate
Because income tax and NI both apply to the same income, what actually matters is the combined marginal rate — what you keep from your next pound:
| Your situation | Income tax | NI | Combined |
|---|---|---|---|
| Basic rate | 20% | 8% | 28% |
| Higher rate | 40% | 2% | 42% |
| £100k–£125,140 taper | 40% (+ taper) | 2% | ~62% |
This is why a pay rise rarely delivers its full headline value, and why pension contributions through salary sacrifice — which avoid both taxes — are so efficient.
Ways to reduce your National Insurance
- Salary sacrifice pension contributions reduce your gross pay for NI purposes, saving 8% or 2% on every pound contributed.
- Cycle to Work and electric vehicle schemes through salary sacrifice reduce NI liability.
- Employer pension contributions attract no NI and are not counted as your income.
- Salary sacrifice childcare schemes can reduce NI for eligible parents.
Most other reliefs, including Gift Aid and personal pension contributions, do not reduce National Insurance — only salary sacrifice does.
Key takeaways
- Employee NI is 8% between £12,570 and £50,270, then 2% above.
- Both thresholds are frozen until 2028, so the burden grows with wage inflation.
- The self-employed pay Class 4 at 6% and 2%, collected via Self Assessment.
- NI is charged per job, which can raise the total for people with two jobs.
- Salary sacrifice is the only common way to reduce employee NI.
Work out your exact contribution with our National Insurance calculator, then see how it combines with income tax in the take-home pay calculator.