National Insurance Explained.
National Insurance (NI) is the second biggest deduction on your payslip after Income Tax. Here is exactly how it is calculated and where the money goes.
What is National Insurance?
National Insurance is a tax on earnings paid by employees, employers, and the self-employed. It builds your entitlement to certain state benefits, most notably the State Pension and Maternity Allowance. A portion also goes towards funding the NHS.
2026/27 NI Rates for Employees (Class 1)
Most employees fall into Category A. For the 2026/27 tax year, the rates are:
- 0% on earnings up to £1,048 a month (£12,570 a year). This is the Primary Threshold.
- 8% on earnings between £1,048 and £4,189 a month (£50,270 a year).
- 2% on earnings over £4,189 a month (the Upper Earnings Limit).
Note: These rates were reduced in recent years from previous highs of 12%.
NI Categories (The letter on your payslip)
Your payslip will show an NI Category letter. This dictates the rate you pay. The most common are:
| Letter | Who it applies to | Impact |
|---|---|---|
| A | All standard employees | Standard 8% / 2% rates |
| C | Employees over State Pension age | You pay 0% NI (Employer still pays) |
| H | Apprentices under 25 | Standard employee rates (Employer pays 0%) |
| M | Employees under 21 | Standard employee rates (Employer pays 0%) |
| B | Married women (reduced rate) | Very rare. Only for women who opted in before 1977. |
How to legally reduce your NI
Because NI is calculated on your gross pay, you can reduce it by using Salary Sacrifice. If you redirect some of your salary into a workplace pension or a cycle-to-work scheme via salary sacrifice, your gross pay drops, and so does your NI bill.
Calculate your exact NI deduction
Enter your gross pay into our calculator to see exactly how much National Insurance you will pay, based on the current 2026/27 rates.
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