How National Insurance works for employers: Rates, thresholds and what you need to know

Each year, National Insurance contributions (NICs) total around £170 billion. This tax is a cornerstone in funding a variety of state benefits, including welfare and state pensions.

For employers and HR professionals, understanding how National Insurance works is essential—in addition to ensuring compliance with government requirements, it helps maintain accurate payroll, employment records, and budgeting.

Overlooking this can lead to a variety of pay and employment errors, as well as financial penalties. HM Revenue and Customs (HMRC) charges a 5% penalty—plus interest—on late payments after 30 days, with additional charges coming after six and 12 months. Not only this, but reputational damage can also impact employee trust and business stability.

In this guide, we’ll break down what employers need to know about National Insurance and, importantly, how to stay compliant.

What is National Insurance?

National Insurance (NI) is a tax on earnings collected by the UK government from people aged 16 and over who are under state pension age, and is paid by employees, the self-employed, and employers. It is used to fund a number of state benefits, including the state pension, Jobseeker’s Allowance, Maternity Allowance, Bereavement Support, and the NHS.

When individuals start paying National Insurance, their contributions are recorded against their unique National Insurance number. This helps HMRC keep track of the benefits people are eligible for. Importantly, employers are responsible for deducting National Insurance from employee salaries and paying this directly to HMRC.

It’s essential for you and your HR team to understand the intricacies of NI. Accurate and timely payments not only keep you compliant but also ensure your employees can access the benefits and support they’re entitled to.

Employer National Insurance rates

Employers pay different National Insurance rates depending on what an employee’s category letter and earnings. Both the category and level of earnings determine how much NI should be deducted from their salary.

Keep in mind that NI thresholds often change annually at the end of the tax year in April, so you’ll need to stay up to date with the most recent category limits.

The National Insurance rates for 6 April 2025 to 5 April 2026 are as follows:

Do I have to pay National Insurance on benefits and expenses?

Yes, employers need to pay Class 1A National Insurance on expenses and benefits provided to their employees. You should report this to HMRC online at the end of the tax year, or through your payroll. However, this depends on how you handle expenses and benefits.

If you pay for expenses and benefits through employee payroll, you’ll need to:

• Pay Class 1A NI throughout the year
• Report expenses and benefits through your payroll software
• Submit a P11D(b) online form at the end of the year to report all Class 1A National Insurance liabilities.

If you don’t pay for expenses and benefits through payroll, you’ll need to:

• Submit a P11D online form for each employee you’ve provided with taxable benefits or expenses
• Submit a P11D(b) online form at the end of the year to report all your Class 1A NI liabilities.

National Insurance rates will differ depending on the benefit and expense, so you’ll need to be mindful of this when paying.

You can use the government’s expenses and benefits A-Z glossary to work out how much you’ll need to pay.

What are National Insurance classes?

National Insurance contributions are divided into different classes—for example, Class 1A and 1B.

Each employee will have a class status, which determines how and when NI is paid (e.g. through payroll or online at the end of the tax year). This also depends on an individual’s employment status —full-time or self-employed, for example.

• Class 1. Paid by employees and employers through payroll. Based on employee earnings
• Class 1A. Paid by employers on most benefits and expenses
• Class 1B. Paid by employers on benefits and expenses that are included in a PAYE settlement agreement (PSA)
• Class 2. Paid by self-employed people, often at a flat rate
• Class 3. Voluntary contributions paid by non-working people. Often paid to protect benefit entitlement and to fill any gaps in their NI record.

How to calculate National Insurance

If you want to work out exactly how much National Insurance you need to pay as an employer, there are a few ways you can do it.

The first is by using the government’s National Insurance calculator. You can use this tool to see how much NI you’ll need to deduct from your employees’ earnings.

Before you begin, you’ll need a few pieces of information, including:

• Period of pay: for example, every two weeks or monthly
• Date you paid your employee
• Amount you paid them: before any deductions were made
• Employee’s category letter: this should be on their pay slip.

National Insurance deadlines for employers

As an employer, you’re responsible for deducting National Insurance from your employees’ wages and submitting and reporting your Class 1A and 1B contributions on time. Here are some key deadlines to keep in mind for the 2025–26 tax year:

6 July

• Report the Class 1A National Insurance you owe (payment is not due pay this yet).
• Report all the necessary expenses and benefits.
• Provide employees with a copy of this information.

22 July

• Pay all the Class 1A National Insurance you owe.
• If you’re paying by cheque, this is due on 19 July.

22 October

• Pay all the Class 1B National insurance you owe if you have a PAYE Settlement Agreement.
• If you’re paying by cheque, this is due on 19 October.

Every month

• Pay Class 1 National Insurance if you operate through a payrolling system.

Keep on top of National Insurance

Reporting and submitting your National Insurance contributions correctly and on time is important, but there’s no need for it to feel overwhelming. Overall, you just need to be aware of:

• Your employees’ category letters
• Their NI class and how this affects their contributions
• The current National Insurance rates for the tax year
• Important report and payment deadlines

Plus, the government and HMRC provide plenty of tools and guidance when getting ready to report.

The important thing is ensuring all your National Insurance records and payments are accurate and on time to avoid any penalties, and to ensure that your employees can access the right benefits and support.