Class 1 National Insurance: Everything You Need to Know (2025/26)

Quick answer: Class 1 National Insurance is a contribution that both employees and employers make based on employment earnings. According to official government guidance, here’s how Class 1 National Insurance contributions break down for the 2025/26 tax year:

For Employees:

For Employers:

Both employee and employer contributions are collected automatically through the PAYE system and go towards qualifying for the State Pension and other benefits.

Key Takeaways

• Who pays National Insurance Class 1? Employees who are under the State Pension age and earn more than £242 per week pay Class 1 NI. Their employers also contribute.
• How much do employees pay? For the 2025/26 tax year, employees pay 8% on earnings between £242 and £967 per week, and 2% on any earnings above that.
• How much do employers pay? For the 2025/26 tax year, employers pay a rate of 15% on all employee earnings above the Secondary Threshold of £96 per week.
• What is the Primary Threshold? This is the point at which employees start paying NI. For 2025/26, it's set at £242 per week (£12,570 per year).
• What is the Secondary Threshold? This is the point at which employers start paying NI. For 2025/26, it's £96 per week.
• What if I can't work? You might be eligible for Class 1 NI credits, which protect your State Pension record.
• Can employers reduce their NI bill? Yes, eligible employers can claim the Employment Allowance to reduce their liability by up to £10,500 a year.
• What about the self-employed? If you're self-employed, you don't pay Class 1. Instead, you'll pay Class 2 and Class 4 National Insurance.

Most people know they pay National Insurance. Few actually understand what Class 1 means - and that gap ends up costing businesses money, causing payroll errors, and creating unnecessary stress at year-end, which can all be solved if you hire the right accountant, saving enormous time and money, protecting you from hefty fines.

Here's the thing: Class 1 National Insurance is the single largest NI obligation for UK employers and employees. Getting it wrong means penalties from HMRC, unhappy employees, and potential compliance headaches.

This guide breaks down exactly what Class 1 National Insurance contributions are, who pays them, the current rates and thresholds for 2025/26, what the penalties are if you pay Class 1 National Insurance late or not at all and how Class 1 NI credits work. Whether you're an employer setting up payroll for the first time or a business owner trying to understand your liabilities, this is the complete picture.

What Is Class 1 National Insurance?

Class 1 National Insurance is the type of National Insurance paid on earnings from employment. It has two sides:

• Primary contributions: Paid by the employee.
• Secondary contributions: Paid by the employer.

Both amounts are calculated based on how much an employee earns in a given pay period - weekly or monthly - and are collected through the PAYE (Pay As You Earn) system. This means neither the employer nor the employee needs to make a separate payment to HMRC; it all goes through payroll.

Class 1 NI contributions count towards several state benefits, most importantly, the State Pension. They also support entitlement to:

• New Style Jobseeker's Allowance (JSA)
• New Style Employment and Support Allowance (ESA)
• Statutory Maternity, Paternity, and Adoption Pay
• Bereavement Support Payment
• Maternity Allowance

Put simply: Class 1 National Insurance is how employees build their entitlement to the UK's social safety net - and how employers contribute to it.

Who Pays Class 1 National Insurance?

Both employees and employers pay Class 1 National Insurance, but for different reasons and at different rates.

1- Employees pay Class 1 NI if they are:

• Under State Pension age
• Earning above the Primary Threshold (£242/week or £1,048/month for 2025/2026)

Once you reach State Pension age, you stop paying employee NI contributions entirely - even if you're still working. You can check your state pension age on gov.uk.

2- Employers pay Class 1 NI (secondary contributions) on the earnings of every employee whose pay exceeds the Secondary Threshold (£417 per month, £5,000 per year). This applies regardless of the employee's age, meaning employers continue to pay even after an employee passes State Pension age (unless a specific exemption applies).

It is worth noting that employees earning between the Lower Earnings Limit (£125/week or £6,500/year) and the Primary Threshold are treated as though they've paid contributions - even though no money actually leaves their pay packet. This protects their NI record without them having to contribute.

What Are the Class 1 National Insurance Rates for 2025/26?

The rates below apply from 6 April 2025 to 5 April 2026, as published by HMRC (GOV.UK, 2025).

Employee (Primary) Class 1 National Insurance Rates

Employer (Secondary) Class 1 National Insurance Rates

One important distinction here: the employer's Secondary Threshold (£96/week) is much lower than the employee's Primary Threshold (£242/week). This means employers start paying NI on employees who earn well below the point at which those employees themselves begin contributing.

What Are the Class 1 National Insurance Thresholds for 2025/26?

The thresholds for 2025/26 are unchanged from the previous year. According to HMRC's official guidance (GOV.UK, 2025), the key Class 1 National Insurance thresholds are:

The Primary Threshold is aligned with the income tax Personal Allowance at £12,570 - so employees start paying both income tax and NI at roughly the same earnings level.

How Is Class 1 National Insurance Calculated?

Class 1 NI is calculated per pay period - not cumulatively across the year. Unlike income tax under PAYE, previous months' earnings don't affect this month's calculation. Each week or month is assessed independently.

Worked Example (Employee, Category A, Monthly Pay)

An employee earns £2,500/month:

Total employee Class 1 NI: £116.16/month

Employer NI on the same salary:

Total employer Class 1 NI: £312.45/month

This is a significant cost. An employer paying a £30,000/year salary contributes over £3,000/year in Class 1 NI alone - before factoring in pension contributions, sick pay, or any other employment costs.

How much does Class 1 National Insurance Cost You as an Employer in 2026?

Let’s imagine you hire a new employee with a salary of £36,000 per year.
Let's break it down using the 2025/26 tax year rates.
A £36,000 annual salary works out to £3,000 per month.

Employee's National Insurance (Primary Class 1)

First, let's look at what your employee pays. This amount is deducted from their salary through the PAYE system, so it doesn't directly cost your business, but it's good to know.

• They pay no NI on the first £1,048 they earn each month.
• They pay 8% on earnings between £1,048 and £4,189 per month.
• They pay 2% on any earnings above £4,189 per month.

For an employee earning £3,000 per month, their monthly NI contribution would be calculated on the amount above £1,048.

• NI-able earnings: £3,000 - £1,048 = £1,952
• Employee NI paid: 8% of £1,952 = £156.16 per month (or roughly £1,874 per year).

So, while their gross salary is £36,000, their take-home pay will be lower after tax and these NI deductions.

Employer's National Insurance (Secondary Class 1)

Now, for the part that directly impacts your business costs. As an employer, you pay National Insurance on your employee's earnings above a certain threshold.

For the 2025/26 tax year, employers pay 15% on earnings above the Secondary Threshold, which is £417 per month (£5,000 per year).

Here's how to calculate your contribution for this employee:

• NI-able earnings: £3,000 − £417 = £2,583
• Employer NI paid: 15% of £2,583 = £387.45 per month

Annually, this adds up to £4,649.40.

What this means for the "Real Cost to Your Business" section below it:

That section also needs updating to reflect the corrected figures:

So, What's the Real Cost to Your Business?

When you hire someone on a £36,000 salary, the cost to your business is more than just their paycheque. You have to factor in your employer's NI contributions.

• Annual Salary: £36,000
• Annual Employer NI: £4,649.40
• Total Annual Cost: £40,649.40

And remember, this is before factoring in other essential costs like pension contributions, holiday pay, or sick pay.

Why Does This Matter?

Understanding this "hidden cost" is crucial for any business owner. Employer National Insurance significantly increases the total cost of hiring. As you start to grow your team, these costs multiply, and budgeting for them accurately can be the difference between financial stability and unexpected cash flow problems, which is going to be an absolute MUST to know in the 2025/2026 tax year. See how you can maintain a healthy cash flow with our experts' guide.

What Is Secondary Class 1 National Insurance?

Secondary Class 1 National Insurance is what employers contribute on top of an employee's wages-it doesn't come out of their pay packet.

For the 2025/26 tax year, employers pay 15% Class 1 National Insurance on any employee earnings above these thresholds:

• £96 per week
• £417 per month
• £5,000 per year

Special cases affecting employer Class 1 NI

Certain employees have a 0% employer NI rate on earnings up to a higher threshold. This includes:

• Employees under 21: Employers pay 0% NI on their earnings up to the Upper Secondary Threshold (£967 per week) and 15% on anything above that.
• Apprentices under 25: The same rules apply as for employees under 21 (0% up to £967 per week, then 15%).
• Veterans in their first year of civilian employment: Employers pay 0% on earnings up to £967 per week, then 15% above that.
• Freeport and Investment Zone employees: These employees may also benefit from a 0% rate up to a special Upper Secondary Threshold, with the standard 15% rate applying thereafter. Eligibility and specific thresholds depend on the location and scheme rules.

These reliefs are particularly important to consider if you're hiring apprentices or younger workers, as the employer NI savings can be significant.

What Is Class 1A National Insurance?

Class 1A National Insurance is an employer-only charge on taxable benefits in kind provided to employees. Common examples include:

• Company cars
• Private health insurance
• Interest-free loans over £10,000

The Class 1A rate for 2025/26 is 15%, applied to the taxable value of the benefit. Employers report and pay Class 1A at the end of the tax year via a P11D submission - it is not included in the regular PAYE bill. P11D submission can be complicated to DIY; do not submit your benefit-in-kind form before reading our guide about P11D Submissions.

There is also Class 1B National Insurance, which applies when an employer has a PAYE Settlement Agreement (PSA) with HMRC. This covers minor or irregular benefits and expenses. The Class 1B rate for 2025/26 is also 15%.

What Are Class 1 National Insurance Credits?

Class 1 NI credits are a way for people who cannot make full NI contributions to still protect their State Pension entitlement and eligibility for certain benefits.

Unlike paying actual contributions, credits are added to your NI record without money changing hands.

Who qualifies for Class 1 NI credits?

According to GOV.UK, Class 1 credits may be available if you are:

• Claiming New Style Jobseeker's Allowance (JSA)
• Claiming New Style Employment and Support Allowance (ESA)
• A carer for someone with a disability
• Unable to work due to illness

Class 1 credits count towards the State Pension and can help you qualify for New Style JSA and ESA. They are distinct from Class 3 credits, which count only towards the State Pension.

If you're between jobs or have gaps in your record for any of the above reasons, it is worth checking your NI record on the HMRC personal tax account to ensure credits have been applied correctly.

Class 1 vs Class 2 National Insurance: What's the Difference?

This is one of the most common questions for people who are both employed and self-employed - or who are moving from employment to self-employment.

The key difference is how they're paid and the rate structure. Class 1 is earnings-based and calculated through payroll. Class 2 is a flat weekly amount paid annually through Self Assessment.

If you are both employed and self-employed simultaneously, you will pay Class 1 NI on your employment income through PAYE and Class 4 NI (plus potentially Class 2) on your self-employment profits. There is an annual maximum cap on total NI contributions, so you may not owe the full amount of both.

Who Is Exempt from Employer Class 1 National Insurance Contributions?

There are specific categories where employers pay reduced or zero secondary Class 1 National Insurance. These include:

• Employees under 21 earning below the Upper Secondary Threshold (£50,270/year)
• Apprentices under 25 earning below the Apprentice Upper Secondary Threshold (£50,270/year)
• Veterans in their first year of civilian employment, up to £50,270/year
• Freeport and Investment Zone employees, subject to location-specific thresholds

Additionally, Employment Allowance effectively reduces the total employer Class 1 NI bill by up to £10,500 per tax year (2025/26). Eligible employers can claim this through payroll software, offset against their PAYE bill.

You are not eligible for Employment Allowance if:

• Your sole employee is also a director of the company.
• From April 2025, employers paying more than £100,000 in Class 1 National Insurance liabilities can also claim Employment Allowance, provided they meet the other eligibility requirements.
• You receive other de minimis state aid that takes you over the threshold.

How to Pay Class 1 National Insurance

Paying Class 1 National Insurance can feel complicated, whether you're an employee or an employer. Let's break down exactly what you need to do, step by step.

For Employees: How to Pay Class 1 NI

Good news! If you're an employee, the process is straightforward.

• Your employer handles it all: Your Class 1 NI contributions are automatically deducted from your salary through the Pay As You Earn (PAYE) system.
• No action needed: You don’t need to do anything yourself. It’s all taken care of before you receive your payslip.

For Employers: A Step-by-Step Guide to Paying Class 1 NI

As an employer, you are responsible for calculating and paying both employee and employer contributions to HMRC. Here’s how it works:

Step 1: Calculate National Insurance: Use HMRC-approved payroll software to automatically calculate how much employee and employer NI is due for each pay period.

Step 2: Report to HMRC: Submit your payroll information to HMRC through Real Time Information (RTI) every time you pay your employees. This keeps HMRC updated in real-time.

Step 3: Pay Your Bill: You'll need to pay HMRC the combined total of Income Tax, employee NI, and employer NI. This payment is typically due by the 19th (for non-electronic payments) or 22nd (for electronic payments) of the following month.

Or contact us to get this sorted for you in a few hours.

How can you pay HMRC? You have several options:

• Online or telephone banking
• CHAPS (for same-day payments)
• Bacs (allow 3 working days)
• Corporate debit card
• Direct Debit

What about benefits in kind? If you provide benefits to employees, you’ll owe Class 1A contributions. These are reported separately on a P11D form and must be paid by 22 July following the end of the tax year.

How to Use a Class 1 National Insurance Calculator

HMRC provides official calculators and tables to manually check payroll calculations. Third-party payroll tools will typically handle this automatically.

To manually estimate your Class 1 NI liability, you need:

• The employee's gross earnings for the pay period (weekly or monthly)
• The correct NI category letter (found on the employee's tax code documentation or from HMRC)
• The applicable thresholds and rates for the current tax year

For most employees on category letter A (the standard rate), the 2025/26 calculation is:

• 0% on earnings up to £242/week
• 8% on earnings from £242.01 to £967/week
• 2% on earnings above £967/week

Employer contributions follow the same approach, applying 15% to all earnings above £96/week.

Here’s a quick summary of what you need to know about Class 1 National Insurance:

• Who pays? Both employees and employers.
• How is it paid? It’s automatically deducted from an employee’s pay through the PAYE system.
• What are the employee rates for 2025/26? Employees pay 8% on earnings between £242.01 and £967 per week, and 2% on anything above that.
• What is the employer rate? Employers pay 15% on employee earnings above £96 per week.
• Are there any exemptions? Yes, employers might pay 0% NI for employees under 21, apprentices under 25, and veterans on earnings up to £50,270 per year.
• What is the Employment Allowance? It’s a scheme that can reduce an employer’s annual National Insurance liability by up to £10,500.
• What’s the difference between Class 1, 2, and 4? Class 1 is for employees, while Classes 2 and 4 are for the self-employed.

Get Your NI Contributions Right — Debitam Can Help

Getting Class 1 National Insurance wrong is not just an admin headache. It can lead to HMRC penalties, underpayments on employee records, and compliance risks that take time and money to unravel.

At Debitam, we deal with HMRC compliance day in, day out, helping over 26,000 businesses to save money and time - from setting up payroll correctly to making sure employer NI calculations are accurate, Employment Allowance is claimed where eligible, and PAYE submissions happen on time.

Don't leave your payroll compliance to chance. Get in touch with Debitam today and make sure your Class 1 National Insurance obligations are handled properly, every month, without the stress.

Frequently Asked Questions

1. What is a Class 1 National Insurance contribution?

A Class 1 National Insurance contribution is the mandatory payment made by employees and their employers on earnings from employment. Employees pay a primary contribution (8% or 2% depending on earnings); employers pay a secondary contribution (15%) on earnings above the Secondary Threshold. Both are collected through PAYE.

2. What are Class 1 National Insurance credits and who qualifies?

Class 1 National Insurance credits are added to an individual's NI record when they cannot make full contributions - for example, during a period of unemployment while claiming New Style JSA, or during illness. Credits protect entitlement to the State Pension and certain benefits without money being paid directly to HMRC.

3. What is the secondary Class 1 National Insurance threshold for 2025/26?

The secondary Class 1 National Insurance threshold for 2025/26 is £96 per week, £417 per month, or £5,000 per year. Employers pay 15% on all employee earnings above this threshold.

4. How does Class 1 NI differ from Class 2 NI?

Class 1 NI applies to employees and is earnings-based, collected through PAYE at 8% (primary) and 15% (secondary). Class 2 NI applies to self-employed individuals and is a flat weekly rate of £3.45 (2025/26), paid annually via Self Assessment.

5. Who is exempt from employer Class 1 National Insurance contributions?

Employers pay 0% secondary Class 1 NI for employees under 21, apprentices under 25, and veterans in their first year of civilian employment - up to the Upper Secondary Threshold of £967/week (£50,270/year). Additionally, eligible employers can reduce their overall liability by up to £10,500/year through the Employment Allowance.

6. Does Class 1 National Insurance affect State Pension entitlement?

Yes. Both paying Class 1 contributions and receiving Class 1 NI credits count as qualifying years towards the State Pension. You generally need 35 qualifying years for the full new State Pension amount, with a minimum of 10 qualifying years to receive anything.

7. When do employers stop paying secondary Class 1 National Insurance on an employee?

Employers do not automatically stop paying secondary Class 1 NI when an employee reaches State Pension age. Employees stop making primary contributions at State Pension age, but employer secondary contributions continue unless a specific category letter exemption applies.

8. What happens if I pay Class 1 NI late?

HMRC calculates late payment penalties based on the number of defaults in a tax year, not simply how many days late a single payment is. The penalty is applied to the late amount in the relevant tax month, excluding the first late payment of the year:

According to GOV.UK

9. How do I claim back overpaid National Insurance?

If you believe you have overpaid National Insurance, you can request a refund from HMRC. You will need to provide evidence supporting your claim, such as payslips or P60s. It's important to note that there may be a time limit for claiming refunds, so it's best to act as soon as you think you have overpaid it.

10. What is my NI category letter?

Your National Insurance category letter is a single letter used by HMRC to determine the rate of NI you pay. It can be found on your payslip or P60. For example, most employees will be on category letter A. You can check what your NI category letter means on the government's website.