How much National Insurance do I pay in the UK

How much National Insurance do I pay in the UK?

National Insurance is one of the main deductions that can affect how much money you take home from work or keep from self-employed profits in the UK. The amount you pay depends on whether you are employed, self-employed, a company director, an employer, or a mix of more than one. It also depends on how much you earn and which National Insurance class applies to you.

For the 2026 to 2027 tax year, most employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year, and 2% on earnings above £50,270. Most self-employed people pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Employers usually pay employer National Insurance at 15% on employee earnings above £5,000 a year, although special rules can apply for some categories of worker.

This guide explains how National Insurance works in plain English, with examples for employees, sole traders, freelancers, limited company owners, and employers. It also explains how invoice24, a free invoice app, can help you stay organised by creating invoices, tracking income, recording payment status, and keeping the information you need when working out tax and National Insurance.

What is National Insurance?

National Insurance, often shortened to NI, is a UK contribution system connected to employment, self-employment, and entitlement to certain state benefits. Your National Insurance record can affect your entitlement to the State Pension and some other benefits, so it is not just another tax deduction on your payslip.

National Insurance is separate from income tax. Income tax is charged on taxable income, while National Insurance is charged under its own rules. Employees usually see income tax and National Insurance as separate lines on their payslip. Self-employed people normally deal with National Insurance through Self Assessment, alongside their income tax bill.

The most important point is that National Insurance is based on earnings or profits, not simply on money coming into your bank account. Employees pay it on employment earnings. Sole traders pay it on business profits after allowable business expenses. Employers pay it on employee pay above the relevant employer threshold.

National Insurance classes explained

There are several classes of National Insurance. The class you pay depends on how you work and what type of income you receive.

Class 1 National Insurance applies to employees. It has two sides: employee National Insurance, which is deducted from wages, and employer National Insurance, which is paid by the employer. If you are on a payroll, your employer normally calculates and deducts your employee NI automatically through PAYE.

Class 2 National Insurance is linked to self-employment and the National Insurance record. For many self-employed people with profits at or above the small profits threshold, Class 2 is treated as paid without an actual payment being required. People with low profits may be able to pay voluntary Class 2 contributions to protect their National Insurance record.

Class 4 National Insurance applies to self-employed profits. This is the main National Insurance charge that sole traders and partners usually need to budget for when their profits are above the annual threshold.

Class 1A and Class 1B National Insurance are employer charges, usually connected with taxable benefits, expenses, and certain employer arrangements. These are normally relevant to employers rather than employees or sole traders.

How much National Insurance do employees pay?

Most employees pay Class 1 National Insurance. For the 2026 to 2027 tax year, the standard employee rates for category A employees are 0% on earnings up to the primary threshold, 8% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above the upper earnings limit.

The annual employee primary threshold is £12,570. This means that, for most employees, no employee National Insurance is due on earnings up to £12,570 a year. The upper earnings limit is £50,270 a year. Earnings between £12,570 and £50,270 are usually charged at 8%. Earnings above £50,270 are usually charged at 2%.

In weekly terms, the standard employee National Insurance bands are 0% up to £242 a week, 8% from £242.01 to £967 a week, and 2% above £967 a week. In monthly terms, the bands are 0% up to £1,048 a month, 8% from £1,048.01 to £4,189 a month, and 2% above £4,189 a month.

There is also a lower earnings limit, which is £6,708 a year for 2026 to 2027. If you earn at or above this level but below the primary threshold, you may not actually pay employee National Insurance, but you can still build entitlement for certain benefits and State Pension purposes. This is why a salary can sometimes be set at a level where no employee NI is paid, but a qualifying year may still be achieved.

Employee National Insurance examples

Example one: you earn £20,000 a year from one job. You do not pay employee National Insurance on the first £12,570. You pay 8% on the remaining £7,430. That gives estimated employee National Insurance of £594.40 for the year. This is only the NI calculation; income tax and other deductions are separate.

Example two: you earn £35,000 a year. The first £12,570 is outside employee NI. The amount between £12,570 and £35,000 is £22,430. At 8%, this gives estimated employee National Insurance of £1,794.40 for the year.

Example three: you earn £60,000 a year. You pay 8% on earnings between £12,570 and £50,270, which is £37,700. That part gives £3,016. You then pay 2% on earnings above £50,270. On a £60,000 salary, the amount above £50,270 is £9,730, and 2% of that is £194.60. Total estimated employee National Insurance is £3,210.60 for the year.

Example four: you earn £100,000 a year. You pay 8% on £37,700, which is £3,016. You then pay 2% on £49,730, which is £994.60. Total estimated employee National Insurance is £4,010.60 for the year. Again, this is separate from income tax, pension deductions, student loan repayments, and any other payroll deductions.

Why your payslip may not match a simple annual estimate

A simple annual calculation is useful for understanding the rules, but your actual payslip may look slightly different. Employees usually have National Insurance calculated by pay period, not simply by dividing an annual estimate into twelve equal parts. This means weekly and monthly pay patterns can affect the deductions shown on individual payslips.

For example, bonuses, overtime, commission, or irregular pay can push more of one month’s earnings into a higher National Insurance band for that pay period. If you receive a large one-off bonus, the National Insurance in that month may be higher than usual, even if your annual salary has not changed.

This is different from income tax, which often works cumulatively through PAYE tax codes. National Insurance is usually more closely tied to the earnings in each pay period. That is why two people earning the same annual amount can sometimes see different NI deductions if their pay is structured differently.

How much National Insurance do employers pay?

Employers pay employer National Insurance, also known as secondary Class 1 contributions, on employee earnings above the employer threshold. For the 2026 to 2027 tax year, the standard employer secondary threshold is £5,000 a year, or £96 a week, or £417 a month. The standard employer National Insurance rate is 15% on earnings above that threshold.

This employer contribution is paid by the employer on top of the employee’s gross pay. It is not deducted from the employee’s wages. If an employee has a salary of £30,000, the employee sees their own deductions for tax and employee NI, while the employer also has a separate employer NI cost.

For a standard employee earning £30,000 a year, employer NI is broadly calculated on £25,000 of pay above the £5,000 secondary threshold. At 15%, that gives an estimated employer National Insurance cost of £3,750 for the year.

Employer NI is an important cost when hiring staff because it increases the total cost of employment. A business budgeting for an employee should consider gross salary, employer NI, pension contributions, payroll costs, holiday pay, software, equipment, training, and any other employment-related expenses.

Special employer National Insurance categories

Not every employee is treated in exactly the same way for employer National Insurance. Special category letters can apply to employees under 21, apprentices under 25, veterans, employees in Freeports or Investment Zones, and employees over State Pension age. Some categories have a 0% employer NI rate up to a particular upper threshold, with the standard employer rate applying above that point.

For example, employers of some employees under 21 or qualifying apprentices may not pay employer NI up to the relevant upper secondary threshold. This can reduce the cost of employing certain workers, but the correct category letter must be used in payroll.

Employees over State Pension age usually do not pay employee National Insurance, but the employer may still have employer National Insurance to pay. This is an area where payroll setup matters because the wrong category letter can lead to incorrect deductions or payments.

How much National Insurance do self-employed people pay?

If you are self-employed as a sole trader or partner, your National Insurance is usually based on your profits, not your total sales. Profit means your self-employed income after deducting allowable business expenses. This distinction is very important. If you invoice clients for £50,000 but have £10,000 of allowable expenses, your profit is £40,000, and National Insurance is based on that profit figure.

For the 2026 to 2027 tax year, most self-employed people pay Class 4 National Insurance at 6% on profits over £12,570 up to £50,270, and 2% on profits over £50,270. If your profits are £12,570 or less, you usually do not pay Class 4 National Insurance.

Class 2 National Insurance is different. If your self-employed profits are £7,105 or more a year, Class 2 contributions are generally treated as paid, which helps protect your National Insurance record without you making a separate Class 2 payment. If your profits are below that level, you may be able to choose to pay voluntary Class 2 contributions. For 2026 to 2027, the voluntary Class 2 rate is £3.65 a week.

Most self-employed people deal with Class 4, and any voluntary Class 2, through Self Assessment. This means you usually calculate your business profit for the tax year, complete your tax return, and pay the resulting income tax and National Insurance to HMRC by the relevant deadline.

Self-employed National Insurance examples

Example one: your self-employed profit is £10,000. You do not pay Class 4 National Insurance because your profit is below £12,570. Because your profit is above £7,105, Class 2 may be treated as paid for National Insurance record purposes. You may still have income tax considerations depending on your total income, but Class 4 NI would not be due on this profit level.

Example two: your self-employed profit is £25,000. You pay no Class 4 NI on the first £12,570. You pay 6% on the remaining £12,430. That gives estimated Class 4 National Insurance of £745.80 for the year.

Example three: your self-employed profit is £50,000. You pay 6% on £37,430, which is the amount between £12,570 and £50,000. This gives estimated Class 4 National Insurance of £2,245.80 for the year.

Example four: your self-employed profit is £80,000. You pay 6% on profits between £12,570 and £50,270, which is £37,700. That gives £2,262. You then pay 2% on profits above £50,270. On £80,000 of profit, the amount above £50,270 is £29,730, and 2% of that is £594.60. Total estimated Class 4 National Insurance is £2,856.60 for the year.

National Insurance for freelancers and contractors

Freelancers often ask whether National Insurance is charged on invoices. The answer is that National Insurance is not charged directly on each invoice in the way VAT might be. If you are a sole trader, you invoice your client for your work, record your income and expenses, calculate your profit for the tax year, and then pay any Class 4 National Insurance due through Self Assessment.

This means good record keeping is essential. You need to know what you invoiced, what was actually paid, which invoices are overdue, and what expenses relate to your business. A free invoice app such as invoice24 can help by making it easier to create professional invoices, keep track of client billing, monitor payment status, and maintain clearer income records throughout the year.

If you work through a limited company, the position is different. A company director may receive salary, dividends, or both. Salary can be subject to PAYE, employee National Insurance, and employer National Insurance. Dividends are not subject to National Insurance, although they can be subject to dividend tax. The best mix depends on profit, personal circumstances, tax rates, available allowances, pension planning, and business goals.

Contractors also need to be aware of employment status and off-payroll working rules. If a contract is treated as employment for tax purposes, the National Insurance position may be different from a straightforward sole trader arrangement. When in doubt, it is sensible to get advice from an accountant or tax professional.

National Insurance if you are both employed and self-employed

Many people have a job and a side business. You might work for an employer during the week and run a freelance business in the evenings, or you might have part-time employment while building a sole trader business.

In this situation, you can pay employee Class 1 National Insurance through your job and Class 4 National Insurance on your self-employed profits. Your employer deducts Class 1 NI from your wages through PAYE. You then report your self-employed income and expenses through Self Assessment, where your Class 4 NI is calculated.

Because there can be interaction between employment income and self-employed profits, the total amount due can be more complicated than a single simple calculation. HMRC will use your tax return information to work out the final position. If you have significant income from both employment and self-employment, you may want to set money aside throughout the year so the Self Assessment bill is not a surprise.

National Insurance for company directors

Company directors who are paid a salary are normally treated as employees for National Insurance, but directors have special calculation rules. Directors often have an annual earnings period for National Insurance, even if they are paid monthly. This can affect when NI becomes payable and how it appears in payroll.

A director who takes a small salary may pay little or no employee National Insurance, depending on the salary level. However, employer National Insurance may still be relevant if salary exceeds the employer secondary threshold and no relief or allowance applies. Dividends do not attract National Insurance, but they must be paid from company profits after corporation tax and must be properly recorded.

For small limited companies, National Insurance planning is often part of a wider salary and dividend strategy. The right approach depends on the current rates, the company’s profits, whether Employment Allowance is available, other employment income, pension contributions, and the director’s personal tax position.

National Insurance and the State Pension

National Insurance contributions can help build qualifying years for the State Pension. A qualifying year is a tax year that counts towards your National Insurance record. You usually need enough qualifying years to receive the full State Pension.

For employees, earning above the lower earnings limit can help build a qualifying year even if no employee National Insurance is actually deducted because earnings are below the primary threshold. For self-employed people, Class 2 treatment is important because it can protect the National Insurance record.

If you have gaps in your National Insurance record, you may be able to make voluntary contributions. This can be useful for people who had low income, took time out of work, lived abroad, or had periods without employment or self-employment. Whether voluntary contributions are worth paying depends on your age, existing record, expected future work, and State Pension forecast.

Do you pay National Insurance after State Pension age?

Employees usually stop paying employee National Insurance once they reach State Pension age. However, employers may still need to pay employer National Insurance on their wages. This is why the employee’s payroll category needs to be updated correctly.

Self-employed people may have different timing rules when they reach State Pension age. Depending on the tax year and the type of contribution, they may still have obligations for a period after reaching State Pension age. Because the timing can be specific, it is important to check the rules for the relevant tax year or speak to an adviser.

Even if you no longer pay National Insurance, you may still pay income tax if your income is above your tax-free allowances. National Insurance and income tax are separate, so stopping NI does not mean all deductions stop.

How National Insurance differs from income tax

National Insurance and income tax are often confused because employees see both on their payslips and self-employed people often pay both through Self Assessment. However, they are not the same thing.

Income tax is charged on many types of income, including employment income, self-employed profits, rental income, pension income, and dividends. National Insurance is more closely connected to earnings from work and self-employment. You generally do not pay National Insurance on dividends, pension income, bank interest, or rental income, although there can be special rules in some property business situations.

The rates and thresholds are also different. For example, an employee may pay income tax at 20%, 40%, or 45% depending on taxable income and location in the UK, while employee National Insurance has its own 8% and 2% structure for most category A employees. Scottish income tax bands can differ from the rest of the UK, but National Insurance is a UK-wide system.

How to calculate your National Insurance as an employee

To estimate employee National Insurance, start with your gross employment earnings. Then apply the relevant employee NI bands. For a simple annual estimate for a standard category A employee, ignore the first £12,570, calculate 8% on earnings from £12,570 to £50,270, and calculate 2% on earnings above £50,270.

For example, if your salary is £42,000, subtract £12,570. This leaves £29,430 charged at 8%. The estimated employee NI is £2,354.40 for the year. If your salary is below £50,270, there is no 2% upper band to calculate.

For a salary of £75,000, calculate 8% on £37,700, which is £3,016. Then calculate 2% on £24,730, which is £494.60. The estimated annual employee NI is £3,510.60.

Remember that exact payroll deductions can differ because National Insurance is normally calculated by pay period. Bonuses, pay rises, changes of job, salary sacrifice arrangements, and irregular earnings can all affect the amount shown on your payslip.

How to calculate your National Insurance as a sole trader

To estimate self-employed National Insurance, begin with profit, not turnover. Add up your self-employed income for the tax year, then subtract allowable business expenses. The result is your taxable business profit before personal allowances and other tax calculations.

For Class 4 National Insurance in 2026 to 2027, you usually pay nothing on the first £12,570 of profit, 6% on profits from £12,570 to £50,270, and 2% on profits above £50,270.

For example, if your freelance business has £38,000 of income and £6,000 of allowable expenses, your profit is £32,000. Subtract £12,570, leaving £19,430. At 6%, the estimated Class 4 NI is £1,165.80.

If your business has £90,000 of income and £20,000 of expenses, your profit is £70,000. You pay 6% on £37,700, which is £2,262, and 2% on £19,730, which is £394.60. Estimated Class 4 NI is £2,656.60.

What income should freelancers track?

Freelancers and sole traders should track all business income, even if a client has not yet paid. You should also keep clear records of invoice dates, payment dates, client names, invoice numbers, services supplied, VAT treatment if relevant, and whether each invoice is paid, unpaid, overdue, or cancelled.

This is where invoice24 can be useful. A good invoicing process makes it easier to issue invoices quickly, reduce admin, follow up unpaid invoices, and see how much money has come into the business. When your invoices are organised, it becomes much easier to estimate profits, budget for Self Assessment, and avoid the common mistake of treating every pound received as spendable income.

You should also track expenses. These may include software, office costs, travel, equipment, subcontractors, professional fees, insurance, phone costs, internet costs, and other business-related spending. Not every expense is allowable, and some expenses need to be split between business and personal use, but accurate records give you a better starting point.

How much should you set aside for National Insurance?

If you are employed, your employer usually deducts employee National Insurance automatically, so you do not normally need to set aside money separately for it. However, if you have self-employed income, rental income, dividends, or other untaxed income, you may still need to budget for Self Assessment.

If you are self-employed, a practical approach is to set aside a percentage of your profit or each payment received. The right percentage depends on your expected profit, income tax band, student loan position, VAT registration, and other factors. Many sole traders set aside money regularly into a separate tax savings account so they are ready for the January and July Self Assessment payment deadlines.

Because Class 4 National Insurance is 6% within the main profits band and 2% above the upper profits limit, NI is only one part of the amount to save. Income tax is usually the larger part of the bill. If you are VAT registered, VAT collected from customers is not yours to keep, so it should also be managed separately.

Does National Insurance apply to invoices?

National Insurance does not usually appear as a separate line on a sole trader invoice. Your invoice should show the amount charged for goods or services, any VAT if you are VAT registered, and the total due. The client pays the invoice, and you later account for tax and National Insurance through your own records and Self Assessment.

For example, if you invoice a client £1,000 for design work and you are not VAT registered, the invoice total is £1,000. You do not add National Insurance to the invoice. Instead, the £1,000 forms part of your business income. After your business expenses are deducted, your annual profit is used to work out income tax and Class 4 National Insurance.

Using invoice24 helps keep this process simple because you can create clear invoices, keep your billing consistent, and check which clients have paid. Good invoice records help you understand your turnover and support your year-end calculations.

National Insurance and VAT

National Insurance and VAT are completely different. VAT is a tax on sales charged by VAT-registered businesses. National Insurance is based on employment earnings or self-employed profits. A business can be VAT registered whether or not the owner personally pays a large amount of National Insurance.

If you are VAT registered, your invoices usually need to include VAT information, such as your VAT number, VAT rate, VAT amount, and total including VAT. National Insurance is not added in the same way. It is calculated later based on your employment earnings or business profits.

For freelancers and small businesses, mixing up VAT, income tax, and National Insurance can cause cash flow problems. The safest approach is to keep clear records, separate tax money from everyday spending, and review your likely tax position throughout the year.

National Insurance for landlords

Rental income is usually not subject to National Insurance in the same way as trading profits, but there can be exceptions if your property activity amounts to running a business. The distinction can depend on how active the business is, the level of services provided, and the nature of the property activity.

Most ordinary landlords think mainly about income tax, mortgage interest rules, allowable expenses, and possibly capital gains tax when selling a property. However, if property activity becomes more like a trade, National Insurance may need closer attention.

Because property tax can be complex, landlords with significant property activity should take advice if they are unsure whether National Insurance applies.

Can you reduce National Insurance?

There are legitimate ways National Insurance can be reduced, but they depend on your circumstances. Employees may reduce taxable and NI-able pay through certain salary sacrifice arrangements, such as pension contributions, where offered by an employer and set up correctly. This can reduce employee NI and employer NI, although it also reduces contractual cash salary.

Employers may be able to reduce employer National Insurance through Employment Allowance, where eligible, or by using correct category letters for qualifying employees, such as apprentices or employees under 21. Employers must be careful to apply the rules correctly and keep payroll records up to date.

Self-employed people reduce Class 4 National Insurance by correctly claiming allowable business expenses, because NI is based on profit. This does not mean inventing expenses or claiming personal spending. It means keeping accurate records and claiming genuine business costs that are allowed under the rules.

Limited company owners may structure income through salary and dividends, but this should be considered alongside corporation tax, dividend tax, pension planning, cash flow, and commercial needs. The lowest National Insurance option is not always the best overall financial option.

Common National Insurance mistakes

One common mistake is thinking National Insurance is based on turnover. For sole traders, Class 4 National Insurance is based on profit after allowable expenses, not total invoices issued. This is why expense tracking matters.

Another mistake is forgetting that employee and employer National Insurance are separate. An employee may see their NI deduction on a payslip, but the employer may also be paying a significant extra amount on top of salary.

A third mistake is assuming National Insurance and income tax have the same thresholds. They do not. They may use similar numbers in some places, but the rules, rates, and calculations are different.

A fourth mistake is failing to plan for Self Assessment. Freelancers sometimes spend all client payments as they arrive, then struggle when the tax and NI bill is due. Setting aside money regularly can make the bill much easier to handle.

A fifth mistake is using poor invoice records. Missing invoices, inconsistent invoice numbers, unclear payment status, and unrecorded expenses can all make tax time more stressful. A tool like invoice24 helps by keeping invoicing organised from the start.

How invoice24 helps with National Insurance planning

invoice24 is a free invoice app designed to help small businesses, freelancers, contractors, and sole traders manage invoicing more easily. While it does not replace professional tax advice, it can support the record-keeping side of National Insurance planning.

When you create invoices consistently, track what has been sent, and monitor what has been paid, you get a clearer view of business income. This matters because self-employed National Insurance is based on annual profit. You cannot estimate profit properly unless your income records are reliable.

invoice24 can also help you stay professional with clients. Clear invoices reduce confusion, make payment terms easier to understand, and help you follow up overdue payments. Better cash flow makes it easier to set aside money for tax and National Insurance instead of being caught out at the end of the tax year.

For freelancers asking “How much National Insurance do I pay?”, the answer starts with knowing your numbers. The more organised your invoices and records are, the easier it is to estimate your bill, plan ahead, and speak confidently to an accountant if you need advice.

Quick National Insurance summary for 2026 to 2027

Most employees pay 0% employee National Insurance up to £12,570 a year, 8% on earnings from £12,570 to £50,270, and 2% on earnings above £50,270. These are the standard figures for many employees, but the exact amount can depend on pay period, category letter, age, directorship, and other payroll details.

Most self-employed people pay Class 4 National Insurance at 6% on profits from £12,570 to £50,270, and 2% on profits above £50,270. Class 2 may be treated as paid where profits are at or above the small profits threshold, while voluntary Class 2 may be available for people with lower profits who want to protect their National Insurance record.

Employers usually pay employer National Insurance at 15% on employee earnings above £5,000 a year. Special employer rules can apply for some employees, including under-21s, apprentices, veterans, and people in specific tax sites.

Final thoughts

How much National Insurance you pay in the UK depends mainly on your work status and income level. Employees usually pay Class 1 through PAYE. Self-employed people usually pay Class 4 through Self Assessment. Employers pay secondary Class 1 on staff wages. Directors, landlords, high earners, people with multiple jobs, and those who are both employed and self-employed may need to look more closely at the rules.

The key figures for most people in 2026 to 2027 are straightforward: employees generally pay 8% in the main band and 2% above the upper earnings limit, while self-employed people generally pay 6% in the main profits band and 2% above the upper profits limit. However, the exact calculation can vary depending on how and when you are paid.

For freelancers, sole traders, and small business owners, the best starting point is accurate record keeping. Create invoices promptly, track payments, record expenses, and review your likely profit during the year. invoice24 gives you a simple free way to manage invoices and stay organised, helping you keep the information you need when it is time to estimate income tax, National Insurance, and overall business cash flow.