Dividend Tax: Learn how UK dividend tax rates and the Dividend Allowance affect your investments: UK Dividend Tax Guide.
Capital Gains Tax: See our complete UK Capital Gains Tax Guide for rates, allowances, and reduction strategies.
For the full PAYE, NI, and take-home planning framework, see the UK Income Tax hub.
National Insurance Contributions (NICs) are a significant part of your tax burden — often adding 8% on top of income tax. Here’s how NICs work and what you’ll pay.
Want your exact figure? Use the National Insurance Calculator to look up your annual and monthly NIC for any salary, including take-home after both tax and NIC.
What Is National Insurance?
National Insurance is a UK tax on earnings and self-employment profits. It funds:
- State Pension — you need 35 qualifying years for the full pension
- Jobseeker’s Allowance
- Employment and Support Allowance
- Maternity Allowance
- Bereavement Support Payment
NICs are separate from income tax and have their own rates and thresholds.
Employee NIC Rates (Class 1) — 2026/27
| Earnings Band | Rate |
|---|---|
| Below £12,570 (Primary Threshold) | 0% |
| £12,571–£50,270 (Upper Earnings Limit) | 8% |
| Over £50,270 | 2% |
Employee NIC Examples
| Gross Salary | Annual NIC | Monthly NIC | Effective NIC Rate |
|---|---|---|---|
| £20,000 | £594 | £50 | 3.0% |
| £25,000 | £994 | £83 | 4.0% |
| £30,000 | £1,394 | £116 | 4.6% |
| £40,000 | £2,194 | £183 | 5.5% |
| £50,000 | £2,994 | £250 | 6.0% |
| £60,000 | £3,194 | £266 | 5.3% |
| £80,000 | £3,594 | £300 | 4.5% |
| £100,000 | £3,994 | £333 | 4.0% |
NIC as a percentage of income actually decreases as you earn more due to the flat 2% rate above the Upper Earnings Limit.
Employer NIC Rates (Class 1) — 2026/27
| Earnings Band | Rate |
|---|---|
| Below £9,100 (Secondary Threshold) | 0% |
| Over £9,100 | 13.8% |
Employer NICs are a significant “hidden” employment cost:
| Employee Salary | Employer NIC | Total Cost to Employer |
|---|---|---|
| £25,000 | £2,194 | £27,194 |
| £35,000 | £3,574 | £38,574 |
| £50,000 | £5,644 | £55,644 |
| £75,000 | £9,094 | £84,094 |
| £100,000 | £12,544 | £112,544 |
Self-Employed NIC Rates (Classes 2 & 4) — 2026/27
Class 2 NICs
| Threshold | Rate |
|---|---|
| Profits over £12,570 | £3.45/week (£179.40/year) |
Class 2 NICs are relatively small but important — they count toward your qualifying years for State Pension.
Class 4 NICs
| Profit Band | Rate |
|---|---|
| £12,571–£50,270 | 6% |
| Over £50,270 | 2% |
Self-Employed Examples
| Annual Profit | Class 2 | Class 4 | Total NICs |
|---|---|---|---|
| £20,000 | £179 | £446 | £625 |
| £30,000 | £179 | £1,046 | £1,225 |
| £50,000 | £179 | £2,246 | £2,425 |
| £75,000 | £179 | £2,746 | £2,925 |
| £100,000 | £179 | £3,246 | £3,425 |
Self-employed individuals pay lower NICs than employees — 6% vs. 8% on the main band — but don’t receive employer contributions to their pension.
Combined Tax and NIC Burden
Your true marginal rate includes both income tax and NICs:
| Income Band (Employee) | Income Tax | Employee NIC | Combined | After £100K PA trap |
|---|---|---|---|---|
| £0–£12,570 | 0% | 0% | 0% | |
| £12,571–£50,270 | 20% | 8% | 28% | |
| £50,271–£100,000 | 40% | 2% | 42% | |
| £100,001–£125,140 | 40%+20%* | 2% | 62% | PA withdrawal |
| Over £125,140 | 45% | 2% | 47% |
*The effective 60% income tax rate comes from losing £1 of Personal Allowance for every £2 earned.
National Insurance and Your State Pension
NICs build your State Pension entitlement:
| Qualifying Years | Pension Amount (2026/27) |
|---|---|
| 35 years (full) | £11,502/year (£221.20/week) |
| 30 years | £9,858/year |
| 20 years | £6,572/year |
| 10 years (minimum) | £3,286/year |
| Under 10 years | £0 (not eligible) |
How to Build Qualifying Years
| Activity | Counts Toward NI Record? |
|---|---|
| Employed (earning over £12,570) | Yes (Class 1 NICs) |
| Self-employed (profits over £12,570) | Yes (Class 2 NICs) |
| Claiming Child Benefit | Yes (NI credits) |
| Caring for someone 20+ hours/week | Yes (Carer’s Credit) |
| Receiving Jobseeker’s Allowance | Yes (NI credits) |
| Voluntary contributions (Class 3) | Yes (£17.45/week) |
Check your NI record at gov.uk to see how many qualifying years you have and whether you should fill gaps. For the full breakdown of what each qualifying year is worth and whether voluntary contributions make financial sense, see the State Pension Calculator.
NIC Thresholds History
| Tax Year | Primary Threshold (Employee) | Main Rate |
|---|---|---|
| 2026/27 | £12,570 | 8% |
| 2025/26 | £12,570 | 8% |
| 2024/25 | £12,570 | 8% |
| 2023/24 | £12,570 | 12% |
| 2022/23 | £12,570 | 13.25% |
| 2021/22 | £9,568 | 12% |
NICs have been cut significantly — from 13.25% to 8% — since 2022, providing meaningful take-home pay increases.
Strategies to Reduce NICs
| Strategy | How It Works | Saving |
|---|---|---|
| Salary sacrifice for pension | Employer contributes to pension instead of paying salary — saves both employee and employer NICs | 8% (employee) + 13.8% (employer) |
| Salary sacrifice for childcare | Exchange salary for tax-free childcare vouchers | 8% employee NIC |
| Salary sacrifice for cycle-to-work | Reduce salary for bike purchase | 8% employee NIC |
| Directors: optimal salary + dividends | Pay £12,570 salary, rest as dividends | Dividends don’t attract NICs |
| Voluntary NI contributions | Fill gaps for minimal cost to boost State Pension | £17.45/week per missing year |
Pension salary sacrifice is the most impactful — on a £10,000 sacrifice, you save £800 in employee NICs and your employer saves £1,380.
NI Credits: Building Your Pension Record Without Paying NICs
Not all qualifying years on your NI record come from paid contributions. NI credits allow you to build State Pension entitlement even when you are not working or not earning enough to pay NICs.
Automatic NI credits are awarded when you:
- Claim Child Benefit for a child under 12 (even if you opt out of receiving the payment — registering to not receive the Child Benefit cash still awards the NI credit)
- Receive Jobseeker’s Allowance, Employment and Support Allowance, or Universal Credit
- Work as a foster carer registered with a local authority
- Receive Carer’s Allowance for caring for a disabled person
Carer’s Credit: If you provide at least 20 hours of care per week for a disabled person but do not qualify for Carer’s Allowance (because the person you care for does not receive a qualifying disability benefit), you can apply for Carer’s Credit directly from HMRC. This protects your State Pension record during years spent caring.
The Child Benefit NI credit trap: Many families earning above the High Income Child Benefit Charge (HICBC) threshold opt out of Child Benefit entirely to avoid the charge. However, you can register for Child Benefit, elect not to receive the payments, and still receive the NI credits. One missed qualifying year costs approximately £329/year in State Pension (£11,502 divided by 35 qualifying years). Always register for Child Benefit even if you repay the full amount through HICBC — the NI credit is worth keeping.
Check your NI record at gov.uk/check-national-insurance-record to count your qualifying years and identify any gaps.
Should You Make Voluntary NIC Contributions?
You can purchase missing qualifying years through voluntary Class 3 NICs — currently £17.45/week (£907.40/year) for the 2026/27 tax year. Whether this is worth doing depends on how many qualifying years you have and how far you are from State Pension age.
When filling gaps makes strong financial sense:
- You have fewer than 35 qualifying years and will not reach 35 through normal employment before State Pension age
- The cost recovers quickly — one qualifying year costs approximately £907 and adds approximately £329/year to your State Pension, meaning the investment pays back in under 3 years
- You are within 15 years of State Pension age, making the long-term benefit clear
When to be cautious:
- Your NI forecast already projects 35+ qualifying years through normal employment or automatic credits
- You have a defined benefit (final salary) pension that provides retirement income independently of the State Pension
- The gap years you are considering are over 6 years old — under current rules you can normally only fill gaps from the last 6 tax years
Deadline: Until April 2025, HMRC offered a special extended window to fill gaps going back to 2006. That window has now closed. You can currently fill gaps from 2018/19 onwards. Call the Future Pension Centre on 0800 731 0175 to get a personalised State Pension forecast before making voluntary contributions.
National Insurance After State Pension Age
Once you reach State Pension age (currently 66 for both men and women), you stop paying National Insurance — even if you continue in employment or self-employment. This provides a meaningful uplift to take-home pay for older workers.
| Situation after State Pension age | NIC change |
|---|---|
| Employed (any salary) | No employee NICs deducted |
| Self-employed | No Class 2 or Class 4 NICs |
| Employer NICs | Employer still pays 13.8% on your earnings |
Example: An employee earning £30,000/year saves £1,394/year in employee NICs from the day they reach State Pension age — an immediate 4.6% effective pay rise with no salary increase required.
If NICs are still being deducted from your pay after you reach State Pension age, notify your payroll department immediately. HMRC uses NI category letters to signal your status; overpaid NICs can be reclaimed through Self Assessment.
National Insurance for Company Directors
Company directors are treated differently to regular employees for NIC purposes. Most employees have NICs calculated week by week or month by month. Directors have NICs calculated cumulatively over the tax year — an important distinction when pay is irregular.
The optimal director salary strategy: Many owner-directors take a salary equal to the Lower Earnings Limit (£6,396/year) or the Secondary Threshold (£9,100/year) to maintain a qualifying NI year while minimising or eliminating both employee and employer NICs. Additional income is then taken as dividends, which do not attract NICs.
On a £9,100 salary plus £50,000 in dividends versus a £59,100 salary: the NIC saving on the salary portion alone is approximately £3,768 in employee NICs and £5,521 in employer NICs — a combined £9,289/year. The optimal split depends on the corporation tax position; an accountant should confirm the calculation for your specific circumstances.
Key Takeaways
- Employees pay 8% on earnings between £12,571 and £50,270, then 2% above that
- Self-employed pay 6% on the main band — lower than employees
- The combined tax + NIC rate is 28% for basic rate earners and peaks at 62% in the £100K–£125K band
- You need 35 qualifying years for the full State Pension (£11,502/year)
- Salary sacrifice is the most effective NIC-reduction strategy — saving both employee and employer NICs
- Check your NI record to identify gaps that could reduce your State Pension
Sources
- HM Revenue & Customs. “National Insurance: Introduction.” gov.uk/national-insurance
- HM Revenue & Customs. “National Insurance Rates and Categories.” gov.uk/national-insurance-rates-letters
- UK Government. “Check Your National Insurance Record.” gov.uk/check-national-insurance-record
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy