Employer’s National Insurance 2025/2026: a founder’s guide

If you’re a UK founder, the moment you decide to hire your first employee, or even pay yourself a regular salary as a limited company director, you open the door to a new kind of tax: Employer’s National Insurance (NICs).

Figuring out your company’s Employer National Insurance contributions might feel like a big step. It’s quite straightforward once you understand the core rates and thresholds, and what they mean for your business.

In this guide, you’ll discover what Employer’s National Insurance is, when you have to pay it and what the current Employer’s National Insurance contribution rates are for the 2025/2026 tax year (6 April 2025 – 5 April 2026). 

Key takeaways

• Employer’s National Insurance is a tax paid by your company on an employee’s salary when it reaches a certain threshold
• The standard rate for Employer’s National Insurance is currently 15% (2025/2026 tax year)
• Limited companies often use the Employment Allowance to offset the Employer’s National Insurance increase

Let’s get straight to it. 

National Insurance contributions (NICs) are payments made towards the UK’s social security — they help fund things like the NHS and the state pension system.

When we talk about Employer’s National Insurance, we’re referring to what’s called Class 1 National Insurance contributions (NICs). This is the tax your company (as an employer) pays to HMRC on the wages of its employees, including company directors who take a salary.

Think of it like this: there are three payments due for every employee’s salary, and your company is responsible for collecting and submitting them:

1. Income Tax (paid by the employee)
2. Employee’s NICs (paid by the employee)
3. Employer’s NICs (paid by the company — this is the extra cost you need to budget for)

Employer NICs are essentially your company’s contribution towards the state pension and other benefits systems in the UK. While Class 1 NICs are the main tax for employers, you might also hear about Class 1A and Class 1B, which relate to other types of payments, like benefits in kind. 

We’ll touch on those briefly now, but this article focuses on the main event — Class 1 NICs.

Class 1A National Insurance contributions (NICs) are paid by employers on the Benefits in Kind (BiKs) they provide to employees. BiKs include non-cash perks like a company car, private health insurance, or gym membership.

The BiKs system is how HMRC taxes the value of these perks.

• When it’s paid: Annually, after the end of the tax year, via the P11D and P11D(b) forms
• The current rate: Class 1A NICs is generally the same rate as Employer’s National Insurance rates — currently 15% (2025/2026 tax year)

So, if your company provides BiKs, you’ll need to calculate 15% of the taxable value and pay that amount to HMRC.

Your company pays Class 1B National Insurance contributions (NICs) if it enters into a special agreement with HMRC called a PAYE Settlement Agreement (PSA). 

This is used to pay tax and NICs due on minor or irregular expenses and benefits (like staff entertainment, small gifts or ad-hoc travel expenses). The benefit of a PSA is that the company pays all the tax and NICs for the employee, meaning the employee doesn’t have to worry about reporting it.

• When it’s paid: Annually
• The rate: The Class 1B rate is also currently 15% (2025/2026 tax year). This rate is applied to the total tax and NICs that your company is covering under the PSA

Class 1A and Class 1B National Insurance rates are a way to simplify taxes on company benefits, but for most small businesses, Class 1 (the main salary NICs) and Class 1A are the primary ones you’ll encounter.

Yes, as an employer, you’re also responsible for deducting an employee’s Class 1 National Insurance contributions from their salary (and your own, if you’re a director taking a salary) and paying it to HMRC. 

Your employee’s contribution to the Class 1 NIC is known as the primary contribution, while your contribution as the employer is known as a secondary contribution.

To calculate these amounts, HMRC uses several income limits, including the lower earnings limit, the primary threshold, the secondary threshold and the upper earnings limit. The two main thresholds you need to be aware of are:

• Primary threshold: This is the point when the employee starts paying NICs. For the 2025/2026 tax year, this is £12,570 per year
• Secondary threshold: This is the point when your company (the employer) starts paying Employer National Insurance contributions. This kicks in when an employee’s wage exceeds £5,000 per year, at the current rate of 15%

For founders and business owners, the secondary threshold is particularly important. It means your company will start to pay that 15% Employer National Insurance contribution, which is a high cost that should be factored into your budget.

The amount of Employer’s National Insurance your company pays depends on two things: your employee’s salary and the current tax thresholds set by HMRC. 

To put your Employer’s National Insurance contribution rates into context for the 2025/2026 tax year, here are the key figures you need to know:

Threshold	Weekly	Monthly	Annual	Who is affected	Action/rate
Primary threshold	£242	£1,048	£12,570	Employee/director	Employees/ Directors start paying NICs
Secondary threshold	£96	£417	£5,000	Employer	Employers start paying 15% Employer’s NICs on earnings above this point
Upper earnings limit	£967	£4,189	£50,270	Employee & employer	Employee’s NIC rate drops to 2% on earnings above this limit, but the Employer rate remains at 15%

Remember, if you’re a limited company director, you are both the employer and the employee — but don’t worry if this is a bit confusing. 

Here’s an example of how you’d pay yourself.

Imagine you pay yourself a salary of £5,000 per year:

• Employee’s NICs: Since your salary of £5,000 is below the £12,570 primary threshold, you pay £0 in employee NICs
• Employer’s NICs: Since your salary is exactly at the £5,000 secondary threshold, the company pays £0 in employer NICs

Now imagine you decide to pay yourself a higher salary of £10,000 per year.

• Employee’s NICs: Since your salary of £10,000 is below £12,570, you still pay £0 in employee NICs
• Employer’s NICs: Since your salary is above the £5,000 secondary threshold, your company must pay 15% on the difference to HMRC, which is £750

This is why, for employers, the secondary threshold is the most important figure for your company’s budget, as it dictates when your business starts paying the 15% employer’s national insurance cost.

There are ways you can reduce your bill — and we’ll come onto this a bit later. 

For the 2024/2025 tax year (6 April 2024 to 5 April 2025), the main Employer’s National Insurance contribution rate was 13.8% on most employees’ earnings above the secondary threshold.

Here’s a breakdown of the main thresholds and rates: 

Threshold type	Weekly amount	Monthly amount	Annual amount	Employer NICs rate
Primary threshold	£242	£1,048	£12,570	N/A (Employee starts paying)
Secondary threshold	£175	£758	£9,100	0% on earnings up to this amount
Earnings above secondary threshold	Balance above £175	Balance above £758	Balance above £9,100	13.8%
Upper earnings limit	£967	£4,189	£50,270	13.8% continues above this amount

For example: If your employee’s salary was £25,000 in 2024/2025: 

• Earnings above the secondary threshold: £25,000 – £9,100 = £15,900
• Employer NICs: £15,900 x 0.138 = £2,194.2

This means your company would pay £2,194.2 to HMRC.

Big changes to Employer NICs were announced in the Autumn 2024 Budget, and they took effect from 6 April 2025. These changes were: 

• An increase in the main rate of Employer NICs — secondary Class 1 NICs — from 13.8% to 15%
• A cut to the secondary threshold — from £9,100 a year to £5,000 a year

Let’s compare the main and secondary thresholds for 2024/2025 vs 2025/2026: 

Feature	2024/2025 Tax Year	2025/2026 Tax Year
Main Contribution Rate (Class 1 secondary NICs)	13.8%	15%
Secondary Threshold (Annual)	£9,100	£5,000
Secondary Threshold (Monthly)	£758	£417
Secondary Threshold (Weekly)	£175	£96

For example: Let’s use the same employee earning £25,000 to illustrate the impact of these new thresholds: 

• Earnings above the secondary threshold: £25,000 – £5,000 = £20,000
• Employer NICs: £20,000 x 0.15 = £3,000

This means your company would pay £3,000 to HMRC. In comparison to the 2024/2025, that’s quite an increase in Employer National Insurance contributions for that single employee. You need to bear this in mind when budgeting.  

Yes, if you pay yourself or an employee a salary that’s more than the current secondary threshold (£5,000 per year from April 2025), your company must pay Employer’s National Insurance.

Remember, for your company’s budget, the most important figure is the secondary threshold because this is the exact point at which your company starts incurring the 15% Employer’s National Insurance cost.

Good to know: If you’re a sole trader, you don’t pay Employer’s National Insurance on your own earnings because you pay self-employed National Insurance instead. You’re only classed as an employer if you hire staff or if you set up a limited company and pay yourself a salary through your company.

The Employment Allowance is a hugely valuable relief that allows eligible businesses to reduce their annual Employer National Insurance contributions bill by up to £10,500 for the 2025/2026 tax year.

It’s essentially a discount designed to help offset the Employer’s National Insurance increase that happened in April 2025. 

How do you know if you’re eligible?
In the 2025/2026 tax year, you can claim the Employment Allowance if:

• You’re a business, charity or community amateur sports club (CASC) with employees 
• You pay Class 1 National Insurance for your staff
• You do less than half your work in the public sector (unless you are a charity).

You can’t claim the allowance if any of the following apply (take note of the first point):

• You’re a limited company with only one director who is also the only employee, and you’re taking a salary above the secondary threshold 
• You employ someone for personal, household or domestic work (for example, a nanny or housekeeper) unless they’re a certified care or support worker
• You’re self-employed with no employees

The Employment Allowance is explicitly designed to support businesses that employ other staff, which is why if you’re a limited company owner and the sole employee, you’re typically not eligible.

The Employment Allowance isn’t a cash payment but a credit that reduces your company’s Class 1 National Insurance bill. 

It’s deducted from your payroll: Each time you run your payroll, you pay less in Employer’s Class 1 NI until you’ve used up the maximum annual allowance, or the tax year ends (whichever is sooner)

Example: If your monthly employer’s NI bill is £1,050, the allowance would cover the full amount for the first 10 months. For months 11 and 12, you would make full payments to HMRC.

The easiest way to offset Employer National Insurance contributions is to use the Employment Allowance (if eligible). Beyond that, here are a few tips for potentially reducing your employer’s National Insurance contributions or related costs:

If you’re a limited company director, this is your most powerful tool for controlling NICs. 

When you take money from your company, you usually have two main options:

• Salary: This is an allowable business expense for Corporation Tax, but, you have to pay both Employee’s (your) and Employer’s (the company’s) NICs if it goes over the relevant thresholds
• Dividends: These are paid out of the company’s post-Corporation Tax profits, but they do not incur any form of National Insurance

The strategy: Pay yourself a low salary — set just below the £5,000 secondary threshold for 2025/2026 — to avoid the 15% Employer’s NIC. Any additional profits can then be taken as tax-efficient dividends.

A Salary Sacrifice Scheme is an excellent way to reduce your company’s NICs bill while promoting employee benefits, usually pensions.

• How it works: An employee agrees to give up a portion of their gross salary (the “sacrifice”). The company then pays that sacrificed amount directly into a benefit scheme, most often their workplace pension
• The NICs saving: Because the salary is reduced, both the employee and the employer avoid paying NICs on the sacrificed amount. This means your company saves 15% on every pound the employee sacrifices. It’s a win-win, as the employee saves tax, and the company saves on NI costs

If you’re a sole trader or limited company founder and need help with a short-term project (like building a website or managing a campaign), hiring a self-employed contractor instead of an employee can eliminate all NICs obligations for your company.

• The difference: When you pay a contractor, you pay them their agreed fee in full without deducting tax or NICs. They’re responsible for paying their own self-employed National Insurance directly to HMRC
• The NICs saving: This avoids the 15% employer’s NIC and removes all associated PAYE/payroll admin and reporting

While outsourcing tasks like payroll, HR, or marketing doesn’t directly reduce the 15% Employer’s NIC rate on your current staff, it is a highly effective way to offset the administrative cost and the risk of getting things wrong.

• How it helps: Instead of having an employee whose salary incurs the 15% Employer’s NIC, you pay a fixed, tax-deductible fee to an external firm (like an accountant or payroll company). That fee is the end of your financial commitment
• The NICs saving: This strategy provides an indirect saving by making sure your filings are accurate, which helps you avoid potential fines from HMRC, and it saves on the overheads associated with hiring and training new staff

HMRC uses the employer’s national insurance payments, along with the employee’s NICs, to fund the UK’s social security system. This includes the state pension, unemployment benefits, and various public services.

For your business, paying Employer’s National Insurance is the legal cost of participating in the UK labour market.  By meeting your responsibilities, you make sure that your company is compliant and avoids HMRC fines — giving you peace of mind.

We totally understand that sorting Employer NICs can feel like a lot of admin. But as a founder, staying on top of these payments is essential.

If you’re thinking about setting up your business, you could use Countingup’s company registration service. Our team handles the application for you, and you’ll be up and running within 24 hours.

Once you start paying yourself or any employees, you’ll need a simple way to track these payments. Our smart business current account app is designed for small business bookkeeping, helping you keep track of all your income and expenses so you always have a clear picture of your total payroll costs. 

Best of luck!

Yes. Employers pay Employer’s National Insurance on their employees’ earnings above the secondary threshold, which is now £5,000 per year. This is 15% (2025/2026) and is an extra cost that the company must budget for, separate from the employee’s wage.

The main Employer’s National Insurance rate increased by 1.2 percentage points, from 13.8% to 15%, for the 2025/2026 tax year. This increase is coupled with a reduction in the secondary threshold from £9,100 to £5,000, meaning your company pays more NICs on a larger portion of staff earnings.

To calculate your Employer National Insurance contributions, take the employee’s total annual salary, subtract the secondary threshold (£5,000 for 2025/2026), and multiply the remainder by the new rate of 15%. Alternatively, most modern payroll software will calculate the exact bill for you automatically!