National Insurance (NI) is often called the "stealth tax." It's deducted from your pay just like Income Tax, but it follows completely different rules. For 2026/27, understanding these rules can save you hundreds of pounds.
What does NI actually pay for?
Unlike Income Tax, which goes into a general pot, NI is ring-fenced (theoretically) for the NHS, the State Pension, and unemployment benefits. Your "contributions" earn you "qualifying years" โ you generally need 35 years of contributions to get the full State Pension.
The 2026/27 Rates (Class 1)
For most employees (Category A), the rates are:
- Earnings up to ยฃ1,048/month: 0% (The Primary Threshold)
- Earnings between ยฃ1,048 and ยฃ4,189/month: 8%
- Earnings above ยฃ4,189/month: 2% (The Upper Earnings Limit)
Why NI is different from Income Tax
Income Tax is cumulative. If you earn nothing in April but double in May, your tax balances out over the year. NI is period-based. Each month (or week) is calculated in isolation. This means if you get a big one-off bonus, you might pay a huge amount of NI that you can never claim back, even if your total annual income is low.
Are you in the wrong category?
Check the letter next to your NI deduction. "A" is standard. If you are under 21, you should be "M." If you are an apprentice under 25, you should be "H." These categories mean your employer pays 0% NI, and sometimes your rate is lower too. If it's wrong, your employer owes you a refund!
Check your specific NI breakdown using our National Insurance guide or see the impact on your take-home with our payslip calculator.