- National Insurance is calculated based on your employment status, earnings or profits, and the thresholds and rates that apply for the tax year.
- Employees, employers and self-employed people do not all pay NI in the same way, so it’s important to check the right class, rate and threshold before working out what is due.
- Using the latest 2025/26 National Insurance rates and examples helps you avoid outdated figures and understand what you may need to pay through PAYE or Self Assessment.
National Insurance is calculated based on your employment status, earnings or profits, and the rates and thresholds that apply for the tax year. If you are an employee, your contributions are usually deducted automatically through PAYE. If you are self-employed, they are typically worked out through Self Assessment. Employers may also need to pay National Insurance on top of employee pay.
In this guide, we explain how National Insurance is calculated for employees, self-employed people and employers, using the latest 2025/26 rates and thresholds.
We also cover the different National Insurance classes, when you may not need to pay, and practical examples to help make the calculations easier to understand, including when hiring a tax accountant might help you save money.
What is National Insurance?
National Insurance is a tax on earnings and self-employed profits. It also helps build entitlement to certain state benefits, including the State Pension.
The way it is calculated changes depending on whether you are employed, self-employed or employing staff. It can also change if you are over State Pension age or fall into a different contribution category.
If you are comparing National Insurance with other deductions taken from pay, our guide to PAYE tax for employees explains how PAYE fits into the wider picture.
How National Insurance is calculated for employees
Most employees pay Class 1 National Insurance through PAYE. That means their employer normally deducts it automatically from their wages before they are paid.
For 2025/26, the basic employee structure works in bands. You usually pay nothing up to the primary threshold, then a main rate up to the upper earnings limit, then a lower rate above that.
Weekly earnings | Employee NI rate |
Up to £242 | 0% |
£242.01 to £967 | 8% |
Over £967 | 2% |
These are the current employee National Insurance rates for most employees in 2025/26.
Employee example
If you earn £1,000 a week, your National Insurance is not charged at one single rate on the whole amount. It is split across the thresholds.
That usually means:
- £0 on the first £242
- 8% on the next £725 = £58
- 2% on the final £33 = £0.66
That gives a total of £58.66 for the week.
Your payslip can still change from month to month if your pay changes. Bonuses, overtime and irregular hours can all affect what is deducted.
If you run payroll or employ staff, payroll management can help keep these deductions accurate and up to date.
If someone’s take-home pay changes after a bonus month, National Insurance is often one of the reasons. It is calculated each pay period, so the deduction can rise and fall with earnings.
How National Insurance is calculated for self-employed people
If you are self-employed, National Insurance is usually based on annual profits rather than weekly or monthly pay. It is normally worked out through your tax return.
For 2025/26, most self-employed people pay Class 4 National Insurance on profits above £12,570. If profits are below £6,845, Class 2 is generally voluntary at £3.50 a week.
Annual profits | National Insurance treatment |
Up to £6,844 | No mandatory NI, Class 2 can be voluntary |
£6,845 to £12,569 | No mandatory payment, but record can still be protected |
£12,570 to £50,270 | Class 4 at 6% |
Over £50,270 | Class 4 at 2% above that level |
HMRC sets out the current self-employed National Insurance rates on GOV.UK.
Self-employed example
If your annual profits are £55,000, you do not pay one flat rate on the whole amount. The calculation is split into bands.
That usually means:
- £0 on the first £12,570
- 6% on the next £37,700 = £2,262
- 2% on the final £4,730 = £94.60
That gives a Class 4 total of £2,356.60 for the year.
If you want the freelancer angle in more detail, How much National Insurance do I pay as a freelancer? is the most relevant next read.
If you still need help with the filing process, Self Assessment for freelancers and Sole trader tax are both useful follow-ons.
How employer National Insurance is calculated
Employers can also have their own National Insurance bill. This sits on top of the employee’s salary and on top of the employee National Insurance deducted through payroll.
For 2025/26, employer Class 1 National Insurance is generally charged at 15% on earnings above the secondary threshold. In many standard cases, that threshold is £417 a month or £5,000 a year.
Employer NI item | 2025/26 position |
Secondary threshold | £417 a month / £5,000 a year |
Employer Class 1 rate | 15% |
That is why National Insurance matters for hiring decisions as well as payslips. If you want the employer side broken out further, see the Employer’s NI contributions guide.
Employment Allowance
Some eligible employers can reduce their employer National Insurance bill through Employment Allowance. For 2025/26, the allowance is £10,500.
If that applies to your business, the Employment Allowance guide for employers is worth reading before you run payroll for the year.
The National Insurance classes that matter most
You do not need to memorise every class, but it helps to know the main ones. The class usually depends on whether you are an employee, self-employed, or an employer dealing with benefits and expenses.
Here are the main classes most readers will come across:
- Class 1: usually paid by employees through PAYE
- Class 2: now usually voluntary for lower-profit self-employed people
- Class 4: usually paid by self-employed people on profits above the lower threshold
- Class 1A and 1B: often relevant to employers for certain benefits and expenses
If employee benefits are part of the picture, How to submit P11D becomes relevant because benefits can affect employer reporting.
When you might not pay National Insurance
You may not have to pay National Insurance if your earnings or profits are below the relevant threshold. Employees also normally stop paying it once they reach State Pension age, although employer obligations can still continue.
Some people also protect their record through credits or voluntary contributions instead of standard payments. That matters if you are thinking about future benefit entitlement rather than just this year’s deductions.
How Sleek helps you get National Insurance right
National Insurance gets messy when payroll, Self Assessment and employer costs all overlap. Small mistakes can lead to the wrong deductions, missed reliefs or confused budgeting.
Sleek helps you stay on top of the numbers with practical support across payroll, tax returns and employer obligations.
Want help getting National Insurance right for your business or personal tax position? Speak to a tax accountant.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on how is national insurance calculated
What is National Insurance used for?
National Insurance helps fund certain state benefits and contributes towards your entitlement to them. Your contribution record can affect access to benefits such as the State Pension, Maternity Allowance and some other forms of state support. In practical terms, National Insurance is not just another deduction from earnings. It also plays a role in building your longer-term entitlement record in the UK system.
When do you start paying National Insurance?
You usually start paying National Insurance from the age of 16, but only if your earnings or profits are high enough to cross the relevant threshold. The exact point depends on whether you are employed or self-employed. If your income stays below the threshold, you may not need to pay. That is why age alone does not automatically mean National Insurance is due.
Do you pay National Insurance on all income?
No, National Insurance does not apply to all income in the same way. It is mainly charged on earnings from employment and profits from self-employment, rather than every type of income you receive. For example, some forms of investment or property income are treated differently. This is one reason National Insurance is not the same as Income Tax, even though both can affect your overall tax position.
What counts as earnings for National Insurance?
For employees, earnings usually include wages, salary, bonuses and some other forms of pay processed through payroll. For self-employed people, National Insurance is generally based on taxable business profits rather than turnover. What counts can vary depending on the type of payment and how it is treated by HMRC. That is why payroll records and tax returns both matter when working out what is due.
Can I check how much National Insurance I’ve paid?
Yes, you can check your National Insurance record through HMRC. This can help you see what contributions have been paid, whether you have any gaps, and how your record may affect future entitlement to benefits such as the State Pension. It is a useful step if you are unsure whether your contributions are complete or if you are thinking about making voluntary contributions.
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What is my National Insurance number used for?
Your National Insurance number is used by HMRC and other parts of government to link contributions and tax records to you. It helps make sure the right payments are allocated to your record and that your entitlement history is tracked correctly. You will often need it when starting work, setting up payroll records, or dealing with tax and benefit administration in the UK.
How is National Insurance calculated for multiple jobs?
If you have more than one job, National Insurance is usually calculated separately for each employment rather than across your total combined earnings. That means you could pay a different amount than someone earning the same total income from just one job. The thresholds are applied to each job individually through payroll, which can make the final position less straightforward than a single-employer setup.
