What Is National Insurance?
National Insurance (NI) is a compulsory contribution paid by employees, employers, and self-employed individuals in the United Kingdom. It funds the State Pension, statutory sick pay, maternity allowance, and other state benefits. Unlike income tax, which is managed through tax codes and bands, NI is calculated separately based on your earnings in each pay period. For the 2026/27 tax year, employee Class 1 NI contributions are split into two tiers: 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270.
How NI Is Calculated
The primary threshold for National Insurance is aligned with the personal allowance at £12,570 per year. This means you do not pay any NI on the first £12,570 of annual earnings. Between the primary threshold and the upper earnings limit of £50,270, you pay 8% on every pound earned. Above the upper earnings limit, the rate drops to 2%. For example, if you earn £35,000 per year, your NI contributions are calculated as 8% of £22,430 (the difference between £35,000 and £12,570), giving approximately £1,794 per year or £150 per month.
Employer NI Contributions
Your employer also pays National Insurance on your behalf, currently at 13.8% on earnings above the secondary threshold. While this does not directly reduce your take home pay, it does affect the total cost of employing you and can influence salary negotiations. Some employers offer salary sacrifice arrangements where pension contributions are made before NI is calculated, reducing both your NI bill and theirs. This can be a tax-efficient way to boost your retirement savings.
NI and Your State Pension
To qualify for the full State Pension, you typically need 35 qualifying years of National Insurance contributions. Each year you earn above the lower earnings limit counts toward your NI record. You can check your NI record on the HMRC website to see how many qualifying years you have accumulated. If you have gaps in your record, you may be able to make voluntary Class 3 contributions to fill them. For a complete picture of your deductions, use our main UK take home pay calculator which includes income tax, NI, student loans, and pension contributions.