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    Employer National Insurance 2026/27

    Rates and Thresholds

    • Rate: 15% on earnings above threshold
    • Secondary Threshold: £5,000
    • No upper earnings limit

    Employment Allowance

    • Up to £10,500 off annual NI bill
    • Available to most employers
    • Not available to single-employee companies

    Special Rates and Exemptions

    Under 21s and Apprentices Under 25

    Employers pay no Class 1 NI on earnings up to £50,270 per year for employees under 21 and apprentices under 25. This significantly reduces employment costs for hiring young workers and makes apprenticeships more attractive to businesses.

    Veterans

    No employer NI for the first 12 months of employment for military veterans in their first civilian job. This relief applies to earnings up to £50,270 per year and helps veterans transition to civilian employment.

    Freeport Employees

    Employers in designated Freeport tax sites can claim relief from employer NI for new employees. The relief is worth up to £50,270 per employee per year and available for 3 years from the employee's start date.

    Strategies to Reduce Employer NI Costs

    Employment Allowance

    • Claim £10,500 annual reduction automatically
    • Available to most businesses
    • Excludes single-director companies
    • Claimed through payroll software

    Salary Sacrifice Schemes

    • Pension contributions save employer NI
    • Cycle to work schemes reduce NI liability
    • Electric vehicle schemes save both parties NI
    • Consider childcare vouchers (existing schemes)

    Complete Guide to Employer National Insurance

    Employer National Insurance is one of the most significant costs for UK businesses beyond salaries themselves. Understanding how it works helps you budget accurately, plan hiring decisions, and identify opportunities to reduce your overall employment costs. This guide covers everything employers need to know about NI contributions for the 2026/27 tax year.

    How Employer NI is Calculated

    Employer National Insurance is calculated on each employee's earnings above the Secondary Threshold of £5,000 per year. The rate is 15% with no upper limit—unlike employee NI, which drops to 2% above £50,270, employer NI continues at 15% regardless of how much your employees earn. This means high earners cost proportionally more in employer NI.

    The calculation is straightforward: (Annual Salary - £5,000) × 15%. For monthly calculations, divide the annual threshold by 12 (£416.67 per month) and apply the same formula to monthly earnings.

    Step-by-Step Employer NI Calculation Examples

    Example 1: Employee earning £35,000 per year

    Step 1: Calculate earnings above threshold

    £35,000 - £5,000 = £30,000

    Step 2: Apply 15% rate

    £30,000 × 15% = £4,500 per year

    Monthly employer NI: £375.00

    Total employment cost: £35,000 + £4,500 = £39,500

    Example 2: Employee earning £75,000 per year

    Step 1: Calculate earnings above threshold

    £75,000 - £5,000 = £70,000

    Step 2: Apply 15% rate

    £70,000 × 15% = £10,500 per year

    Monthly employer NI: £875.00

    Total employment cost: £75,000 + £10,500 = £85,500

    Example 3: Team of 5 employees each earning £40,000

    Per employee: (£40,000 - £5,000) × 15% = £5,250

    Total employer NI: £5,250 × 5 = £26,250

    With Employment Allowance: £26,250 - £10,500 = £15,750

    Total employment cost: (£40,000 × 5) + £15,750 = £215,750

    Employment Allowance: A Complete Guide

    Employment Allowance is a valuable relief that can save eligible employers up to £10,500 per year on their employer NI bill for 2026/27. It's often overlooked by small businesses, but claiming it is straightforward and can make a significant difference to your bottom line.

    Who Can Claim Employment Allowance?

    Most employers can claim Employment Allowance, but there are some exclusions:

    • Eligible: Businesses, charities, and amateur sports clubs with employer NI under £100,000 in the previous tax year
    • Excluded: Companies where the director is the only employee paid above the Secondary Threshold
    • Excluded: Public sector bodies and those doing more than 50% public sector work
    • Excluded: Domestic employers (employing nannies, au pairs, care workers in your home)
    • Eligible: Companies with directors where at least one other employee is paid above £5,000

    How to Claim Employment Allowance

    Claiming is simple and done through your payroll software. At the start of the tax year (or when you first employ someone), your software will ask if you want to claim Employment Allowance. Select "yes" and confirm you're eligible. The allowance is then automatically applied to reduce your monthly PAYE payments until you've used the full £10,500.

    Example: Using Employment Allowance

    Monthly employer NI: £1,500

    Month 1-7: Pay £0 (£10,500 of allowance fully used)

    Month 8: Pay £0 (allowance exhausted)

    Month 8-12: Pay full £1,500 per month

    Salary Sacrifice: Save Employer NI While Benefiting Employees

    Salary sacrifice schemes are one of the most effective ways to reduce employer NI costs while simultaneously providing valuable benefits to employees. The basic principle is simple: the employee agrees to reduce their gross salary in exchange for a non-cash benefit, and both parties save NI on the sacrificed amount.

    Popular Salary Sacrifice Schemes

    Pension Contributions

    Employee sacrifices salary for additional pension contributions. Both parties save NI, and the employee avoids income tax too. The employer saves 15% on every pound sacrificed.

    Electric Vehicles

    Employees lease an EV through salary sacrifice. Very tax-efficient due to low BIK rates (2-5%). Employer saves 15% NI, employee saves income tax and NI.

    Cycle to Work

    Employees get a bike and safety equipment up to £1,000 (or more with newer schemes). Both parties save NI on the monthly sacrifice amount.

    Additional Annual Leave

    Some employers let staff "buy" extra holiday. The salary reduction saves NI for both parties, and employees get better work-life balance.

    Salary Sacrifice Savings Example

    Employee earning £50,000 sacrifices £5,000 for pension

    Employer NI saved: £5,000 × 15% = £750 per year

    Employee NI saved: £5,000 × 8% = £400 per year

    Employee income tax saved: £5,000 × 40% = £2,000 per year (higher rate taxpayer)

    Combined annual savings: £3,150 (in addition to the pension benefit)

    Understanding the True Cost of Employment

    When budgeting for new hires, salary is just the starting point. Employer NI adds 15% to most of the salary cost, and there are often other costs to consider. Understanding the full picture helps you make informed hiring decisions and set appropriate salary budgets.

    Complete Employment Cost Breakdown

    For an employee earning £45,000 per year:

    Gross Salary£45,000
    Employer NI (15% on £40,000)£6,000
    Employer Pension (5% minimum)£2,250
    Recruitment costs (one-time, amortised)£500
    Training and development£500
    Equipment and software£500
    Total employment cost£54,750

    This represents a 19.3% overhead on top of salary (excluding one-time costs).

    Planning for Growth

    When planning to expand your team, use this rough guide: budget approximately 20% above salary for employer NI and minimum pension contributions. Add any additional benefits you offer (private health insurance, enhanced pension, etc.). This gives you a realistic view of the investment required.

    Common Employer NI Mistakes to Avoid

    Not Claiming Employment Allowance

    Many small businesses don't realise they're eligible for up to £10,500 off their employer NI bill in 2026/27. If you have any employees besides a sole director, check your eligibility and claim through your payroll software.

    Forgetting Under-21 and Apprentice Reliefs

    Employees under 21 and apprentices under 25 have a higher Secondary Threshold of £50,270. Ensure your payroll correctly applies these categories—the savings can be substantial.

    Missing the Monthly Payment Deadline

    PAYE (including employer NI) is due by the 22nd of the following month (19th for postal payments). Late payments incur interest and can lead to penalties. Set up a direct debit to avoid missing deadlines.

    Not Considering Salary Sacrifice

    Many employers pay full NI on salary that could be sacrificed for pension contributions. Implementing salary sacrifice for pensions alone can save 15% of every pound employees contribute.

    Incorrect Status for Workers

    Misclassifying employees as self-employed to avoid employer NI is illegal and can result in significant penalties. Use HMRC's CEST tool if you're unsure about employment status.

    Director's Salary: Optimising for Employer NI

    Company directors have flexibility in how they're remunerated, allowing for strategic planning around employer NI. The most common approach is taking a small salary combined with dividends, but finding the optimal salary level requires considering multiple factors.

    Common Salary Strategies

    Option 1: £5,000 Salary

    Salary at Secondary Threshold avoids all employer NI.

    Employer NI: £0

    Employee NI: £0

    Downside: No qualifying year for State Pension unless above Lower Earnings Limit (£6,396)

    Option 2: £12,570 Salary

    Salary at Primary Threshold maximises corporation tax relief while minimising NI.

    Employer NI: £479 (tax deductible)

    Employee NI: £0

    Benefit: Full qualifying year for State Pension, uses personal allowance

    For most director-shareholders, a salary of £12,570 combined with dividends is optimal. The small employer NI cost (£479) is offset by corporation tax relief, and you secure a qualifying year for State Pension. Use our income tax calculator to model different scenarios.

    Frequently Asked Questions

    How much National Insurance do employers pay in 2026/27?+
    Employers pay Class 1 National Insurance at 15% on all employee earnings above £5,000 per year (the Secondary Threshold). There's no upper earnings limit, so employer NI continues at 15% on all earnings above the threshold regardless of how much the employee earns.
    What is the Employment Allowance and can I claim it?+
    Employment Allowance reduces your employer NI bill by up to £10,500 per year for 2026/27. Most businesses with employer NI under £100,000 can claim. However, single-director companies where the director is the only employee cannot claim. You claim it through your payroll software or HMRC online.
    Do I pay employer NI on pension contributions?+
    No. Employer pension contributions are exempt from employer National Insurance, making them very tax-efficient. Employee pension contributions through salary sacrifice also save both employer and employee NI, which is why salary sacrifice pension schemes are popular.
    When do I need to register as an employer?+
    You must register as an employer with HMRC before the first payday if you employ anyone (including directors taking a salary). Register online through HMRC's PAYE registration service. You'll get an employer PAYE reference and Accounts Office reference needed for payroll.
    What's the difference between employer and employee NI?+
    Employee NI (8% then 2%) is deducted from the employee's gross salary and counts toward their state pension and benefits. Employer NI (15%) is an additional cost paid by the employer on top of salary and doesn't affect the employee's state pension or benefits. It's purely a business tax.
    Can I avoid employer NI by paying dividends instead of salary?+
    Company directors often pay themselves a small salary (£5,000 or below) to avoid employer NI, then take the rest as dividends. However, this only works for directors - you cannot pay employees in dividends. Also consider that small salaries mean reduced state pension entitlement.
    Do apprentices and young employees have lower employer NI?+
    Yes. Employees under 21 and apprentices under 25 have a higher Secondary Threshold of £50,270 for employer NI, meaning employers pay no NI on their earnings up to this amount. This makes hiring young people and apprentices more attractive for employers.
    What happens if I don't pay employer National Insurance?+
    HMRC treats unpaid employer NI very seriously. You'll face interest charges, penalties up to 100% of the amount due, and potentially criminal prosecution for deliberate non-payment. Late payment penalties start at 1-2% and increase with repeated defaults. Use PAYE software to avoid errors.
    How do I calculate employer NI for multiple employees?+
    Calculate employer NI for each employee individually based on their salary, then add them together. For each employee: if salary exceeds £5,000, calculate (salary - £5,000) × 15%. Our calculator above handles this automatically and shows both per-employee and total costs.
    Is employer NI tax deductible for corporation tax?+
    Yes. Employer National Insurance contributions are fully deductible as a business expense for corporation tax purposes. This means the true cost is reduced by your corporation tax rate (25% for most companies), making a £1,000 NI bill effectively cost £750 after tax relief.
    Do I pay employer NI on redundancy payments?+
    It depends on the amount. The first £30,000 of statutory and enhanced redundancy pay is exempt from employer NI. Any payment above this threshold is subject to employer NI at 15%. Holiday pay, notice pay, and unpaid wages included in the final payment are always subject to NI.
    How do I pay employer National Insurance to HMRC?+
    Pay employer NI monthly through PAYE. Submit a Full Payment Submission (FPS) to HMRC each payday, then pay the combined PAYE (income tax + employee NI + employer NI) by the 22nd of the following month (19th if paying by post). Most businesses use payroll software for automatic submissions.
    Can I get a refund if I overpay employer NI?+
    Yes. If you've overpaid employer NI (for example, by not applying Employment Allowance correctly), you can reclaim it through your payroll software or by contacting HMRC. Claims can usually be made for the current and previous 4 tax years. HMRC will either refund or offset against future payments.
    Do I pay employer NI on employee benefits?+
    Some benefits are subject to employer NI (Class 1A) at 15%, payable annually on form P11D. This includes company cars, private medical insurance, and most taxable benefits. However, benefits provided through salary sacrifice (pensions, cycle to work) avoid NI entirely as they reduce gross salary.
    What is Class 1A National Insurance?+
    Class 1A NI is a 15% charge on taxable benefits in kind (like company cars and private health insurance). Unlike Class 1 (paid monthly on salary), Class 1A is calculated annually and paid by 22nd July following the tax year end. It's reported on form P11D(b).
    How does salary sacrifice affect employer NI?+
    Salary sacrifice reduces the employee's gross salary before NI is calculated, saving both employer and employee NI. If an employee sacrifices £5,000 for pension contributions, the employer saves £750 (£5,000 × 15%) in employer NI. Many employers share this saving with employees.

    Related Tax Calculators

    Employer NI sits inside payroll cost, so these links help compare employee deductions, salary cost and contractor alternatives. use the National Insurance calculator for employee NI, use the income tax calculator for employee take-home pay and use the IR35 calculator for contractor comparisons.

    Income Tax
    Calculate PAYE take-home pay
    National Insurance
    Employee & employer NI contributions
    Corporation Tax
    Company tax on profits