National Insurance Explained

National Insurance is the second deduction on most payslips, after Income Tax — and the one most people understand least. It is not a tax on your income in the same way, and it is not saved up for you personally. It is a contribution that builds your entitlement to the State Pension and certain benefits, and it is charged at different rates for employees, the self-employed, and employers. This guide explains the classes, the 2026/27 rates, and when you stop paying.

What National Insurance is for

National Insurance contributions — NICs — are payments that build your entitlement to the State Pension and to certain contributory benefits, such as Jobseeker’s Allowance and Maternity Allowance. Your contributions are recorded on your National Insurance record, and the number of qualifying years on that record decides how much State Pension you get.

The money is not held in a personal pot for you. It goes into the National Insurance Fund, which pays current pensions and benefits. That is why gaps in your record matter: a year in which you paid too little, or nothing, may not count as a qualifying year. You can check your record and your State Pension forecast for free on GOV.UK.

Class 1: employees

If you are an employee, you pay Class 1 National Insurance, and it is deducted through PAYE along with your Income Tax. For 2026/27 you pay nothing on earnings up to the Primary Threshold of £12,570 a year (£242 a week, £1,048 a month). On earnings from £12,571 to £50,270 — the Upper Earnings Limit — you pay 8%. On earnings above £50,270 you pay 2%.

Notice that the rate falls at the top, unlike Income Tax, where the rate rises. That is why the combined marginal rate on earnings between £12,571 and £50,270 is 28% (20% Income Tax plus 8% National Insurance), while above £50,270 it is 42% (40% tax plus 2% NI). There is also a Lower Earnings Limit of £6,708 a year: earnings above that count towards your National Insurance record even though no contributions are due until the Primary Threshold.

Your employer pays too

Your employer also pays National Insurance on your earnings — Class 1 employer contributions, at 15% on earnings above the secondary threshold of £5,000 a year (since 6 April 2025). This is on top of your salary, not deducted from it: it costs your employer extra, and it does not appear on your payslip as a deduction from your pay.

There is also an Employment Allowance, which lets eligible employers reduce their National Insurance bill. The allowance is £10,500 for 2026/27. The employer rate and the allowance matter to you mainly because they affect what an employer can afford to pay — and because the 15% rate, up from 13.8% in April 2025, was one of the most argued-over tax changes of recent years.

Class 4 and Class 2: the self-employed

If you are self-employed, you pay Class 4 National Insurance on your profits through Self Assessment. For 2026/27 the rate is 6% on profits from £12,570 to £50,270, and 2% on profits above £50,270. There is no Class 4 on the first £12,570 of profit — the same threshold as the Personal Allowance.

Class 2 used to be a separate weekly payment for the self-employed, but mandatory Class 2 was abolished from 6 April 2024. You can still pay Class 2 voluntarily — the 2026/27 rate is £3.65 a week — and for some people with low profits it is worth doing, because it buys a qualifying year towards the State Pension at a very low cost. If your profits are below the threshold and you pay no Class 4, check whether voluntary Class 2 is worth it for you.

When you stop paying

You stop paying National Insurance altogether once you reach State Pension age, even if you carry on working. Your employer, however, keeps paying employer contributions on your earnings. Tell your employer when you reach State Pension age so they can stop deducting your contributions — and check your payslip afterwards, because the change is not always applied automatically.

There are other exceptions. You do not pay National Insurance on some kinds of income, such as pension income, savings interest, or dividends. And if you have more than one job, each employer applies the thresholds separately, which can mean you overpay across the year — the refunds guide explains how to claim it back.

Sources: GOV.UK, Rates and thresholds for employers 2026 to 2027; GOV.UK, National Insurance rates and categories; GOV.UK, National Insurance for the self-employed.