What is National Insurance? National Insurance is a tax on earnings and self-employed profits that most people in the UK pay alongside income tax. It is not the same as income tax, even though the two are usually taken from your pay at the same time. Income tax goes into general government spending, while National Insurance was set up to fund the state pension and contributory benefits, and part of it goes to the NHS. The amount you pay depends on how much you earn, whether you are employed or self-employed, and which class of National Insurance applies to you. For most employees it is deducted automatically through PAYE, the pay-as-you-earn system, so you will see it as a separate line on your payslip. If you are self-employed, you usually pay it through Self Assessment when you file your tax return.

You pay National Insurance if you are 16 or over and you are an employee earning above a set threshold, or you are self-employed with profits above a set threshold. You generally stop paying once you reach State Pension age, although your employer may still have to pay its share. There is no charge on pension income, savings interest or dividends — National Insurance is charged on earnings from work and on self-employed profits, not on every kind of income. That distinction is one of the reasons the system confuses people: a pensioner with a large private pension can pay income tax on it but no National Insurance, while a worker on a modest salary pays both.

The classes of National Insurance. There are several classes, and the one you pay depends on your employment status. Class 1 is paid by employees and their employers on earnings from employment. Class 1A is paid by employers on some expenses and benefits they give to employees, such as a company car. Class 2 is the flat-rate class for self-employed people, which is now voluntary in most cases. Class 3 is voluntary National Insurance that anyone can choose to pay to fill gaps in their contribution record. Class 4 is paid by self-employed people on their profits, in addition to Class 2. Most people only ever deal with one or two of these: employees deal with Class 1, and self-employed people deal with Class 2 and Class 4. The classes matter because they count towards different things — in particular, it is Class 1 and Class 2 that build up qualifying years for the new State Pension and entitlement to some contributory benefits, while Class 4 on its own does not.

Class 1 rates for employees in 2026/27. For the tax year 2026 to 2027, which runs from 6 April 2026 to 5 April 2027, an employee pays no National Insurance on earnings up to the Primary Threshold, then 8% on earnings between the Primary Threshold and the Upper Earnings Limit, and 2% on earnings above the Upper Earnings Limit. The thresholds, published by GOV.UK, are £242 a week, or £1,048 a month, or £12,570 a year for the Primary Threshold, and £967 a week, or £4,189 a month, or £50,270 a year for the Upper Earnings Limit. The Primary Threshold is deliberately set at the same level as the income tax personal allowance, £12,570 a year, so below that figure you pay neither income tax nor employee National Insurance on your earnings. There is also a Lower Earnings Limit of £129 a week, or £6,708 a year: if you earn between that limit and the Primary Threshold you pay no National Insurance, but those earnings still count towards your State Pension and benefit entitlement.

The 8% main rate is the result of two cuts in recent years. Employees paid 12% on earnings in the main band until January 2024, when the rate was cut to 10%, and then to 8% from April 2024. That 8% rate has been kept for 2026/27. The 2% rate above the Upper Earnings Limit has not changed. So the system is less steep than it was: a worker on average earnings now pays 8 pence in National Insurance on each pound earned in the main band, on top of 20 pence of income tax, giving a combined marginal rate of 28% on that slice of pay.

Worked examples for employees. Take an employee earning £30,000 a year. National Insurance is charged at 8% on the earnings between £12,570 and £30,000, which is £17,430. Eight per cent of £17,430 is £1,394.40 for the year, or about £116.20 a month. Now take an employee earning £60,000 a year. The first £12,570 is free of National Insurance. The next slice, from £12,570 to £50,270, is £37,700, and 8% of that is £3,016. The remaining slice, from £50,270 to £60,000, is £9,730, and 2% of that is £194.60. Add them together and the total is £3,210.60 for the year. Notice that the 2% rate keeps the bill growing even above £50,270, just much more slowly. These examples assume a standard employee with no special category and a single job; if you have two jobs, each job is treated separately for National Insurance, which is different from income tax, where your earnings are added together.

What employers pay. Employers pay National Insurance too, on top of your salary — it is not taken out of your pay. For 2026/27 the employer rate is 15% on each employee's earnings above the Secondary Threshold of £5,000 a year, or £417 a month, or £96 a week. There is no upper limit, so the 15% applies to all earnings above £5,000. The employer rate rose from 13.8% to 15% in April 2025, and at the same time the Secondary Threshold fell from £9,100 to £5,000 a year, so employers started paying on a much larger slice of each salary. On a £30,000 salary, for example, the employer pays 15% of £25,000, which is £3,750 a year. That is a real cost of employing someone, and it is why the employer's National Insurance bill is often discussed in debates about the cost of hiring.

There are reliefs. Employers pay no National Insurance up to the Upper Earnings Limit of £50,270 for employees under 21, for apprentices under 25, and for eligible veterans in their first year of civilian work. The Employment Allowance, which eligible employers can claim against their National Insurance bill, is £10,500 a year for 2026/27. Employers also pay Class 1A at 15% on most expenses and benefits provided to employees. If you run a small business, these reliefs are worth checking, because they can make a real difference to the cost of taking on a young worker or an apprentice.

How National Insurance differs from income tax. The two taxes look similar on a payslip, but they are worked out differently. Income tax is calculated on your total income for the year, adding up all your jobs and applying the personal allowance once. Employee National Insurance is worked out separately for each pay period — weekly or monthly — using that period's thresholds, and separately for each job. That means a bonus in one month can push you into the 2% band for that month, while a quiet month can mean you pay nothing, even though your annual income is the same. It also means that someone with two part-time jobs, each paying below the Primary Threshold, can pay no employee National Insurance at all, even if their combined earnings are above £12,570. Directors are treated differently again, with their National Insurance usually worked out on an annual basis. If your payslip looks wrong, check the pay period first: a weekly-paid worker's threshold is £242 a week, while a monthly-paid worker's is £1,048 a month, and mixing the two up is a common source of confusion.

National Insurance for the self-employed. If you work for yourself, you pay Class 4 National Insurance on your profits — your income minus your allowable expenses, not your total turnover. For 2026/27 the Class 4 rates are 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. So a self-employed person with profits of £30,000 pays 6% of £17,430, which is £1,045.80 for the year. You stop paying Class 4 from 6 April after you reach State Pension age. Class 4 is paid through Self Assessment, along with your income tax, and if your tax bill is over £1,000 you may also have to make payments on account towards the following year.

Class 2 is the other half of the self-employed system, but it has changed. Since 6 April 2024, most self-employed people no longer have to pay Class 2 at all. If your profits are £7,105 or more — the Small Profits Threshold for 2026/27 — Class 2 is treated as paid, at no cost to you, and the year counts towards your State Pension. If your profits are below £7,105, you can choose to pay voluntary Class 2 at £3.65 a week, which is £189.80 for a full year, to protect your record. That choice matters, because Class 4 on its own does not build qualifying years: a self-employed person with low profits who pays no Class 2 and has no other credits could find that the year does not count towards their State Pension, even though they paid Class 4 on profits above £12,570 in a better year. Check your National Insurance record and your State Pension forecast on GOV.UK before deciding whether voluntary payments are worth it for you.

Class 3 voluntary contributions. Class 3 is voluntary National Insurance that you can pay to fill gaps in your record, for example if you spent years abroad, were not working, or earned too little to pay National Insurance. For 2026/27 the Class 3 rate is £18.40 a week, or £956.80 for a full year — much more expensive than voluntary Class 2, so if you are self-employed and can pay Class 2 instead, you should usually do that. You can normally only pay for gaps in the previous six tax years, and voluntary contributions are not always good value: if you already have enough qualifying years for a full State Pension, or if you are likely to build them up through future work, paying for extra years may add nothing to your pension. GOV.UK advises checking your record and your forecast first, and you can pay voluntary contributions by monthly Direct Debit — for 2026/27 the monthly amount is £73.60 in a four-week month and £92.00 in a five-week month.

What your contributions count towards. National Insurance is a contributory system: paying it builds up your record, and that record is what gives you entitlement to the new State Pension and to some contributory benefits, including contribution-based Employment and Support Allowance, Maternity Allowance and Bereavement Support Payment. Earnings between the Lower Earnings Limit and the Primary Threshold count even though you pay nothing on them, which protects low-paid workers. National Insurance credits can also fill gaps — for example, credits are available for people receiving Child Benefit for a child under 12, carers, and people on some benefits — so a year with no earnings does not always mean a gap in your record. The key document is your National Insurance record, which you can check in your Personal Tax Account on GOV.UK, alongside your State Pension forecast, which shows how many qualifying years you have and what you are on course to receive.

Rates, thresholds and the future. The main thresholds — £12,570 and £50,270 — are frozen until April 2031 under announcements made in recent Budgets, which means that as wages rise, more of each pay packet falls into the 8% band. The Budget on 28 October 2026 left the Class 1 rates unchanged at 8% and 2% for employees and 15% for employers, and Class 4 unchanged at 6% and 2%. From 6 April 2027, a few figures rise in line with inflation: voluntary Class 2 goes to £3.80 a week, Class 3 to £19.05 a week, the Small Profits Threshold to £7,355, and the Lower Earnings Limit to £133 a week, while the main rates and the £12,570 and £50,270 limits stay the same. Rates and thresholds usually change on 6 April, the start of the tax year, and sometimes mid-year after a Budget, so always check the current GOV.UK rates page rather than relying on last year's figures.

A quick checklist. First, find the National Insurance line on your payslip and check that your employer is using the right pay period — £242 a week or £1,048 a month before you start paying. Second, if you earn £30,000, expect employee National Insurance of about £1,394 a year; if you earn £60,000, expect about £3,211 — and remember your employer pays on top. Third, if you are self-employed, work out your profit, not your turnover, and remember that Class 4 at 6% applies from £12,570, while Class 2 is treated as paid once your profits reach £7,105. Fourth, check your National Insurance record and State Pension forecast on GOV.UK at least once a year, and look at voluntary Class 2 or Class 3 only after you know how many qualifying years you already have. National Insurance is a large slice of most working people's tax bill, and understanding the thresholds and the classes is the first step to checking that you are paying the right amount — and no more.