National Insurance is the second-largest deduction on most payslips and the least understood. Unlike income tax it is not a general contribution to the exchequer: paying it builds an entitlement, and the number of years you pay determines what State Pension you eventually receive. It also behaves differently from income tax in ways that catch people out — particularly in a month with a bonus.

The 2026/27 rates

Employees pay Class 1 National Insurance at two rates:

8% on earnings between £12,570 and £50,270
2% on everything above £50,270

Both rates and both thresholds are unchanged from 2025/26. The lower figure — the primary threshold — happens to match the income tax personal allowance at £12,570, and the upper earnings limit of £50,270 matches the point where higher-rate income tax begins. That alignment is deliberate, and it is what makes the UK's combined marginal rates behave the way they do.

What that means in pounds

£25,000 → (£25,000 − £12,570) × 8% = £994.40
£35,000 → (£35,000 − £12,570) × 8% = £1,794.40
£50,270 → the full 8% band = £3,016.00
£60,000 → £3,016 + (£9,730 × 2%) = £3,210.60
£100,000 → £3,016 + (£49,730 × 2%) = £4,010.60

Notice what happens after £50,270. Someone on £100,000 earns £39,730 more than someone on £60,270 but pays only £795 more National Insurance, because the rate drops from 8% to 2%. National Insurance is the one major UK deduction that becomes proportionally lighter as you earn more.

This is why the marginal rate at £50,270 barely moves even though income tax doubles there: income tax rises from 20% to 40% at exactly the point National Insurance falls from 8% to 2%. The combined rate goes from 28% to 42% — a real jump, but far less than the headline tax rates suggest.

It is calculated per pay period, not per year

This is the single most useful thing to understand about National Insurance. Income tax under PAYE is cumulative: your employer looks at your income for the whole year to date each payday, so it evens out. National Insurance is not. Each pay period is assessed on its own.

For a monthly-paid employee, the thresholds are applied as £1,047.50 and £4,189.17 a month. If you earn £3,000 in most months and £15,000 in the month your bonus lands, that bonus month is assessed alone: everything above £4,189.17 attracts only 2%, even though your annual salary is nowhere near the upper earnings limit.

Two people with identical annual pay can therefore pay different amounts of National Insurance depending purely on how evenly it arrived. Unlike income tax, nothing reconciles this at the end of the year. Company directors are the exception — they have an annual earnings period, precisely to stop this being used deliberately.

What your employer pays

Secondary Class 1 National Insurance is charged to the employer at 15% on everything above a secondary threshold of £5,000. It never appears on your payslip, but it is part of what you cost.

On a £35,000 salary that is (£35,000 − £5,000) × 15% = £4,500, so the true cost of employing you is £39,500 before any pension contribution. Both the rate and the threshold changed sharply in April 2025 — the rate rose from 13.8% and the threshold fell from £9,100 — which made lower-paid staff substantially more expensive to employ. Smaller employers can offset part of the bill through the Employment Allowance.

Our salary calculator shows the full cost to employer alongside your take-home, which is useful context when negotiating a rise: a £2,000 increase costs your employer roughly £2,300.

What National Insurance actually funds

Contributions go into the National Insurance Fund, which pays the State Pension and the contributory benefits: new-style Jobseeker's Allowance, new-style Employment and Support Allowance, Maternity Allowance and bereavement support. A further slice is allocated directly to the NHS.

The Fund is not invested. Today's contributions pay today's pensions, so the connection between what you pay and what you receive is a matter of entitlement rules rather than a personal pot with your name on it.

Qualifying years and the State Pension

A qualifying year is a tax year in which you paid or were credited with enough National Insurance. What it buys:

10 years minimum before you get any new State Pension at all.
35 years for the full amount.
Between 10 and 35, you get a proportion — roughly 1/35th of the full rate per year.

The full new State Pension for 2026/27 is £241.30 a week, about £12,548 a year, after a 4.8% triple lock rise from £230.25.

You can get a qualifying year without paying anything. Earnings above the lower earnings limit but below the £12,570 primary threshold are treated as if contributions were made, so part-time work still counts. National Insurance credits also cover periods claiming Child Benefit for a child under 12, carer's allowance, or certain out-of-work benefits — which is why registering for Child Benefit matters even for households who opt out of receiving the payment.

You can check your record and any gaps in your Personal Tax Account on GOV.UK. Gaps can sometimes be filled with voluntary Class 3 contributions, though whether that is worthwhile depends on how many years you are likely to accumulate anyway before State Pension age.

The other classes

Class 1 — employees, as above.
Class 1A — employer-only, on benefits in kind such as a company car.
Class 2 — self-employed. Since April 2024 nobody with profits at or above the £7,105 small profits threshold pays it; the record is credited as though they had. Below that it is voluntary at £3.65 a week.
Class 3 — voluntary contributions to fill gaps in your record.
Class 4 — self-employed, 6% on profits between £12,570 and £50,270 and 2% above. See our self-employed guide.

When you stop paying

Employee National Insurance stops at State Pension age, even if you keep working — income tax continues, but the National Insurance line disappears. Your employer still pays their secondary contribution on your earnings.

To see National Insurance in the context of your whole payslip, alongside income tax, student loan and pension, use the take-home pay calculator.