What Are the National Insurance Rates in the UK? 2026–27: What Employers Missed

In this article:

• The Headline Change
• What The Numbers Look Like
• The Full Rate Picture
• Employment Allowance Restrictions
• Director NI Timing Rules

The Headline Change That Most Employers Underestimated

Rate Up, Threshold Down: The Two-Move Squeeze.

From 6 April 2025, the employer Class 1 NI rate increased from 13.8% to 15%. At the same time, the secondary threshold, which is the earnings level above which employers start paying NI, dropped from £9,100 to £5,000. That threshold remains frozen until April 2028.

You are now paying a higher rate on a larger portion of earnings. This is why many employers felt a bigger payroll jump than expected.

What The Numbers Look Like Per Employee

Take an employee earning £25,000 a year.

That is an increase of £806 per employee.

At lower salary levels, the increase feels even sharper because the threshold reduction creates more pressure than the rate increase alone. If your firm is planning recruitment or salary reviews, this number matters more than the headline percentage.

The Full Rate Picture — Employees, Self-Employed, and Benefits

Employee Rates (Updated For 2026–27)

• 8% on earnings between £12,570 and £50,270
• 2% on earnings above £50,270
• Lower Earnings Limit: £6,708 for 2026–27

Employee contributions have not increased. The additional cost sits with employers.

Self-Employed Rates

Class 4 remains:

• 6% on profits between £12,570 and £50,270
• 2% on profits above that

Class 2 is no longer mandatory. Self-employed individuals with profits above £12,570 receive State Pension credit automatically.

Voluntary Class 2 contributions remain available for those below the Small Profits Threshold, which rises to £7,105 for 2026–27.

Class 1A — NI on benefits in kind

Class 1A NI remains at 15%, matching the employer secondary rate. This applies to benefits in kind and is reported through the P11D process. Many firms focus on payroll only and forget that benefit reporting must also reflect the updated rate.

Two Things the Employment Allowance Does Not Fix

The Employment Allowance increased from £5,000 to £10,500, and the previous £100,000 employer NI liability cap was removed. More businesses now qualify, but two groups still receive no real relief.

Who Qualifies Now

Removing the eligibility cap expanded the allowance to larger employers previously excluded. Eligible businesses can now offset up to £10,500 of employer NI each year, which helps reduce part of the increased payroll burden.

Who It Still Does Not Help

Sole director companies with no other employees remain ineligible. This is still one of the most common small, limited company structures in the UK.

Larger employers also hit the ceiling. Once the £10,500 allowance is fully used, employer NI continues at the full rate for the rest of the year.

The Director of NI Timing Rule That Payroll Software Gets Wrong

How Directors’ NI Differs From Employees’

HMRC requires directors’ Class 1 NI to be calculated on total earnings for the tax year, not on standard monthly or weekly pay periods. This is called the annual earnings period method. In practice, this means a director may show little or no NI due in the early months, followed by a catch-up charge later in the year once total earnings pass the NI threshold. This often surprises directors who take irregular drawings rather than fixed monthly salaries.

The Payroll Setup Error Needs to Be Checked For Every Director Client.

Setting payroll software to “standard” earnings periods rather than “annual” results in incorrect NI calculations for directors. This leads to underpayments, and HMRC usually identifies the problem during reconciliation.

You should check the director flag in payroll software for every limited company client. It is a basic setup step, but it is often missed.