Are National Insurance payments due for the period?

Yes, National Insurance payments are generally due for any period in which you or your employees earn above the relevant thresholds. For employees and employers, contributions are typically paid monthly via PAYE. For the self-employed, Class 4 NICs are paid annually through Self Assessment, and voluntary Class 2 can be paid weekly.

What are the NI implications for a non-UK resident paying themselves a salary?

If you are physically working in the UK, you will usually pay UK National Insurance, even if you are not a UK tax resident. Special rules apply if you are on a temporary assignment or if your home country has a social security agreement with the UK, which might require a 'certificate of coverage'. If you are a UK resident working abroad for a UK employer, you might still pay UK NICs for the first 52 weeks.

What is the impact on Employees NI for a new hire?

For a new hire, their employee National Insurance contributions will be deducted from their salary through PAYE once their earnings exceed the Primary Threshold of £12,570 per year for 2026/27. The employer will also start paying employer NICs once the employee's earnings exceed the Secondary Threshold of £5,000 per year.

Have I overpaid employer's National Insurance contributions?

Overpayments can occur due to incorrect threshold settings in payroll software or miscalculations, especially with director's NICs. Regularly reviewing your payroll reports and ensuring your software is updated with the latest thresholds for 2026/27 can help prevent this. If you believe you've overpaid, your accountant can help you review your records and advise on how to reclaim any overpaid amounts from HMRC.

National Insurance contributions explained (2026/27 rates)

What are National Insurance Contributions (NICs)?

National Insurance Contributions (NICs) are a fundamental part of the UK's social security system. They are paid by individuals and businesses to build entitlement to various state benefits, including the State Pension, Maternity Allowance, and some bereavement benefits.

The amount and type of NICs you pay depend on your employment status and how much you earn or make in profit. There are different "classes" of National Insurance, each with specific rules and rates.

National Insurance for Employees and Employers (Class 1 NICs)

If you run a business with employees, both you (as the employer) and your employees will typically pay Class 1 National Insurance. These contributions are collected through your payroll system via Pay As You Earn (PAYE).

Employee National Insurance (Class 1 Primary)

Your employees pay Class 1 Primary NICs on their earnings above a certain threshold. For the 2026/27 tax year:

0% on earnings up to £12,570 per year (the Primary Threshold).
8% on earnings between £12,570 and £50,270 per year (the Upper Earnings Limit).
2% on earnings above £50,270 per year.

The Lower Earnings Limit (LEL) for 2026/27 is £6,708 per year (£129 per week). While employees don't pay NICs below the Primary Threshold, earning above the LEL helps them build entitlement to state benefits.

Employer National Insurance (Class 1 Secondary)

As an employer, you pay Class 1 Secondary NICs on your employees' earnings. This is an additional cost to your business and is not deducted from your employees' wages.

For the 2026/27 tax year:

The employer NIC rate is 15%.
You pay this rate on employee earnings above the Secondary Threshold of £5,000 per year (£417 per month). This threshold is frozen until April 2031.

There are some exceptions, such as a 0% rate for employees under 21, apprentices under 25, veterans in their first year of civilian employment, and employees in designated Freeport or Investment Zones, up to certain thresholds.

The Employment Allowance

The Employment Allowance is a valuable relief that can reduce your employer's Class 1 National Insurance bill. For the 2026/27 tax year, eligible employers can reduce their annual liability by up to £10,500.

Eligibility

Most small and medium-sized businesses, charities, and community amateur sports clubs can claim the Employment Allowance.

You cannot claim if:

You are a company where the director is the only employee paid above the National Insurance Secondary Threshold.
You provide services to a public sector body and do more than half your work in the public sector.
You are caught by IR35 against deemed salary payments.

The previous £100,000 Class 1 National Insurance liability cap for eligibility has been removed, meaning more businesses can now benefit.

How to claim

The Employment Allowance is not automatically applied; you must claim it. You can do this through your payroll software at the start of each tax year. The allowance is set against your employer's Class 1 NIC liability each payroll period until it is used up.

National Insurance for Self-Employed Individuals (Class 2 & 4 NICs)

If you are a sole trader or in a business partnership, you typically pay Class 2 and Class 4 National Insurance through your Self Assessment tax return.

Class 2 National Insurance

Mandatory Class 2 National Insurance was abolished from April 2024 for most self-employed people.

If your profits are above £7,105 (the Small Profits Threshold) for the 2026/27 tax year, you automatically get a qualifying year for your State Pension without needing to pay Class 2 NICs.
If your profits are under £7,105, you can choose to pay voluntary Class 2 NICs to protect your State Pension and other benefit entitlements. The voluntary rate for 2026/27 is £3.65 per week.

Important note for non-UK residents: From 6 April 2026, voluntary Class 2 contributions are no longer available to people living outside the UK. If you live abroad and wish to maintain your National Insurance record, you will need to pay voluntary Class 3 contributions instead, which are £18.40 per week for 2026/27.

Class 4 National Insurance

Class 4 NICs are calculated on your business profits. For the 2026/27 tax year:

0% on profits up to £12,570 (the Lower Profits Limit).
6% on profits between £12,570 and £50,270 (the Upper Profits Limit).
2% on profits above £50,270.

Your Class 4 NICs are calculated as part of your annual Self Assessment tax return and are due by 31 January following the end of the tax year.

National Insurance for Company Directors

Company directors pay Class 1 National Insurance, similar to employees, but the calculation rules are different. Director's NICs are usually calculated on an annual (cumulative) basis, rather than per pay period.

There are two main methods for calculating director's NICs:

Standard (annual) method: NIC liabilities are calculated based on the director's cumulative earnings throughout the tax year against the annual thresholds.
Alternative (pro-rata) method: NIC liabilities are calculated on a monthly or weekly basis, with a final adjustment at the year-end.

Your company will pay employer's Class 1 NICs on your director's salary above the Secondary Threshold, and you will pay employee's Class 1 NICs on your salary above the Primary Threshold, using the rates mentioned earlier.

It's important to remember that dividends are not subject to National Insurance Contributions.

National Insurance on Benefits in Kind (Class 1A NICs)

As an employer, you may also need to pay Class 1A National Insurance on certain work benefits you provide to your employees, known as 'benefits in kind' (e.g., company cars, private medical insurance).

For the 2026/27 tax year, the Class 1A NIC rate on expenses and benefits is 15%.

You report and pay Class 1A NICs annually after the tax year ends, typically using forms P11D and P11D(b). The payment deadline for Class 1A NICs is usually 22 July (for electronic payments) following the end of the tax year. When paying, you'll need a specific 17-character payment reference, which includes your 13-character Accounts Office reference, the last two digits of the tax year, and '13' (e.g., 2613 for 2026/27). This payment must be made separately from your regular PAYE payments.

Common mistakes

Not claiming Employment Allowance: This allowance can significantly reduce your employer NICs, but it must be actively claimed each tax year.
Incorrectly calculating director's NICs: Directors have different calculation rules (annual basis) compared to regular employees, which can lead to over or underpayments if not applied correctly.
Missing payment deadlines: Late payments of NICs (and PAYE) can result in penalties and interest from HMRC.
Incorrect Class 1A reporting: Failing to correctly value, report, and pay Class 1A NICs on benefits in kind can lead to penalties.

Frequently asked questions

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