Published 6 April 2025 · 10 min read
National Insurance 2025/26: Rates & How It Works
National Insurance is one of those payslip deductions that most people notice but few properly understand. It sits right next to income tax on your pay summary, takes a decent chunk of your earnings, and yet nobody ever really explains what it is or why you are paying it. If you have ever wondered where your NI contributions go, how they differ from income tax, or what they mean for your State Pension, this guide covers everything you need to know for 2025/26.
What is National Insurance?
National Insurance (NI) is a tax on earnings that funds the UK's social security system. It was introduced in 1911 as a contributory insurance scheme — the idea being that workers would pay in during their working lives and receive benefits when they needed them. Today, NI contributions fund the State Pension, the NHS, maternity pay, and unemployment benefits (now called Universal Credit).
Unlike income tax, which goes into the general Treasury pot, NI is notionally ring-fenced for social security spending. In practice, the distinction is somewhat blurred, but your NI record directly affects your entitlement to the State Pension and certain other benefits. If you do not have enough qualifying years of NI contributions, you will receive a reduced State Pension or none at all.
Employee NI rates for 2025/26
If you are employed and paid through PAYE, your employer deducts Class 1 National Insurance from your wages automatically. For the 2025/26 tax year, the rates are straightforward:
| Earnings Band | Rate |
|---|---|
| Up to £12,570 (Primary Threshold) | 0% |
| £12,570 – £50,270 (Upper Earnings Limit) | 8% |
| Above £50,270 | 2% |
On a £35,000 salary, your annual employee NI would be £1,794.40. That works out at £149.53 per month. The primary threshold of £12,570 aligns with the income tax personal allowance, which is deliberate — it simplifies the system by ensuring that people earning below the personal allowance also pay no NI.
The 8% rate is the result of several recent cuts. In 2022/23, the rate was 13.25% (including a temporary Health and Social Care Levy). It dropped to 12% in 2023/24, then to 8% from January 2024. These cuts have been one of the most significant tax changes in recent years, putting hundreds of pounds back into the pockets of millions of workers.
Employer NI rates for 2025/26
Your employer also pays National Insurance on your behalf, and the rates are considerably higher. Employers pay 13.8% on all earnings above the secondary threshold of £9,100 per year. This is a cost on top of your salary — it does not come out of your pay, but it does affect how much your employer actually spends to employ you.
On a £35,000 salary, employer NI is £3,574.20 per year. That means the total cost to your employer is £38,574.20, not £35,000. This is important context if you are negotiating a pay rise or comparing job offers — some employers factor their NI liability into total compensation discussions.
The employer NI rate has not changed as frequently as the employee rate. While employees saw significant cuts from 2023 onwards, the employer rate has remained at 13.8% and the secondary threshold was actually lowered from £9,100. This shift effectively increased the employer's burden while reducing the employee's.
Self-employed NI for 2025/26
Self-employed individuals pay two types of National Insurance: Class 2 and Class 4. Class 2 is a flat-rate weekly contribution that helps build your State Pension entitlement. Class 4 is a percentage of your profits, structured similarly to employee NI but at lower rates.
| Type | Basis | Rate |
|---|---|---|
| Class 2 | Flat rate | £3.45/week |
| Class 4 (main) | £12,570 – £50,270 | 6% |
| Class 4 (upper) | Above £50,270 | 2% |
Class 2 contributions cost £179.40 per year (52 weeks at £3.45). You only need to pay if your profits exceed the Small Profits Threshold, but paying voluntarily even if your profits are below this ensures you build up qualifying years for your State Pension.
Class 4 contributions on £35,000 of profit would be £1,345.80. Combined with Class 2, a self-employed person on £35,000 pays £1,525.20 in total NI — noticeably less than the £1,794.40 an employee would pay on the same amount. However, self-employed individuals do not have an employer contributing 13.8% on their behalf, so the overall picture is more nuanced.
How NI affects your State Pension
Your National Insurance record determines how much State Pension you will receive. For the full new State Pension of £221.20 per week (£11,502.40 per year), you need 35 qualifying years. You need at least 10 qualifying years to receive any State Pension at all.
A qualifying year is one in which you have either paid or been credited with enough NI contributions. If you are employed and earning above the Primary Threshold, you automatically get a qualifying year. If you are not working — perhaps because you are caring for children under 12 or claiming certain benefits — you may receive NI credits that count towards your pension.
You can check your State Pension forecast and NI record on the GOV.UK website. If you have gaps in your record, you may be able to make voluntary contributions to fill them, which can be worthwhile if it means qualifying for additional years of State Pension.
NI vs income tax: what is the difference?
National Insurance and income tax are calculated separately and serve different purposes. Income tax funds general government spending — everything from defence to education. NI is specifically intended to fund social security benefits and the NHS. The key practical differences are:
Income tax has a personal allowance of £12,570 and rates of 20%, 40%, and 45%. NI has its own threshold of £12,570 and rates of 8% and 2%. Unlike income tax, NI does not have a personal allowance taper for high earners — you simply pay 2% on everything above the upper earnings limit, regardless of how much you earn.
Another important difference: NI is only charged on earned income (employment or self-employment). If your income comes from investments, property rental, or pensions, you do not pay NI on it. Income tax, on the other hand, applies to almost all types of income.
How NI has changed in recent years
National Insurance has been through more changes in the last four years than in the previous two decades. In 2022/23, the government introduced a temporary 1.25% Health and Social Care Levy, pushing the employee rate to 13.25%. This was reversed within months, and the rate was then cut further — to 12% in January 2024 and 8% from April 2024.
These reductions have been significant for take-home pay. Someone earning £35,000 pays roughly £1,180 less in NI in 2025/26 than they did in 2022/23. You can see the exact difference for your own salary using our income tax comparison tool.
On the employer side, the picture is different. The secondary threshold was reduced to £9,100, meaning employers start paying NI on a larger portion of each employee's salary. The employer rate has remained at 13.8%, making it one of the highest employment taxes in the developed world.
Common mistakes and misconceptions
One of the most common misconceptions about NI is that it directly funds your personal benefits. While your NI record affects your State Pension entitlement, the money you pay in is not saved in a personal pot — it is spent immediately on current pensioners and benefit claimants. The system is pay-as-you-go, not funded.
Another mistake is thinking that NI stops when you reach State Pension age. In fact, employees over State Pension age are exempt from NI, which is a genuine tax saving. However, employers still pay NI on the wages of employees over pension age, which sometimes leads to confusion.
Self-employed individuals sometimes assume they can avoid NI by not registering for self-assessment. This is not the case — if you are trading and earning above the relevant thresholds, you are legally required to register and pay. HMRC has been increasingly proactive about identifying unregistered traders through data matching with platforms and banks.
Using the NI calculator
Our National Insurance calculator gives you a complete breakdown of your NI contributions in seconds. Enter your annual salary or profit, select whether you are employed or self-employed, and click calculate. The tool shows employee and employer contributions separately, with monthly and weekly equivalents so you can cross-check against your payslip.
For a broader picture of your total deductions, try our UK tax calculator, which combines income tax, NI, student loan repayments, and pension contributions into a single breakdown.
This article is for informational purposes only and does not constitute financial advice. NI rates and thresholds may change. Always consult HMRC or a qualified accountant for your specific circumstances.
