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Employer National Insurance Rates: A Guide for UK Employers
Summary:
- Headline NIC rates hold steady for 2026/27, but three changes need attention. The Lower Earnings Limit rises to £6,708 a year and must be configured correctly in payroll software.
- The Employment Rights Act 2025 makes Statutory Sick Pay payable from day one and removes the earnings floor for eligibility. And the full-year cost of the April 2025 rate rise is now fully embedded in workforce budgets.
- Employers who have not re-modelled total employment cost since 2024/25 risk carrying unplanned exposure into the year ahead.
Quick answer: For 2026/27, employer NICs remain at 15% on earnings above £5,000 per year. The LEL rises to £6,708 annually (£559 per month) from 6 April 2026. Employment Allowance stays at £10,500 with no eligibility cap. These figures remain unchanged from 2025/26, except for the LEL uplift. However, employers still need to verify system configurations, recalculate workforce cost models, and act on the ERA 2025 SSP reforms that took effect on the same date.
For the current tax year, employer National Insurance brings no headline rate shock, but that is exactly where complacency sets in. The 15% employer National Insurance Contributions (NICs) rate and the £5,000 Secondary Threshold are now embedded as the new normal, and most businesses are only now experiencing the first full annual budget cycle at these levels. Alongside a revised Lower Earnings Limit (LEL), day-one Statutory Sick Pay (SSP) entitlement under the Employment Rights Act 2025 (ERA 2025), and a salary sacrifice change on the horizon, there is more to action than a simple software update.
2026/27 Employer NIC Rate and Threshold Summary
All figures below are taken directly from HMRC’s Rates and Thresholds for Employers 2026 to 2027, published 30 January 2026 and last updated 7 April 2026.
Employer National Insurance rates and thresholds: 2025/26 vs 2026/27
| Threshold / Rate | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Employer NIC rate (Class 1) | 15% | 15% | None |
| Secondary Threshold (annual) | £5,000 | £5,000 | None |
| Secondary Threshold (weekly) | £96 | £96 | None |
| Secondary Threshold (monthly) | £417 | £417 | None |
| Lower Earnings Limit (annual) | £6,396 | £6,708 | +£312 |
| Lower Earnings Limit (monthly) | £533 | £559 | +£26 |
| Lower Earnings Limit (weekly) | £123 | £129 | +£6 |
| Upper Earnings Limit (annual) | £50,270 | £50,270 | None |
| Upper Secondary Threshold (under 21) | £50,270 | £50,270 | None |
| Apprentice Upper Secondary Threshold | £50,270 | £50,270 | None |
| Veterans Upper Secondary Threshold | £50,270 | £50,270 | None |
| Employment Allowance | £10,500 | £10,500 | None |
| Class 1A and 1B rate | 15% | 15% | None |
Source: HMRC, Rates and Thresholds for Employers 2026 to 2027.
The primary (employee) NIC rate also remains unchanged: 8% on earnings between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270), and 2% on earnings above that.
How Employer NICs Are Calculated
Employer Class 1 NICs apply at 15% on each employee’s gross earnings above the Secondary Threshold of £5,000 per year. There is no upper earnings limit for the employer. The 15% rate applies to all earnings above £5,000 regardless of how high the salary goes.
The formula:
Employer NIC = (Annual Earnings − £5,000) × 15%
For a monthly-paid employee, apply the monthly secondary threshold of £417.
One practical point worth flagging: where an employee has multiple jobs, each employer calculates NIC independently based on what they pay. There is no aggregation across employments for employer contributions.
What Has Changed from 2025/26?
The honest answer is: very little on the face of it. Rates and most thresholds are frozen. The one meaningful change is the LEL increase, driven by the September 2025 Consumer Price Index (CPI) rate of 3.8%, which HMRC used to uprate the LEL from £6,396 to £6,708 per year.
Why does this matter in practice? The LEL determines two things: whether an employee builds a qualifying year for State Pension purposes (you earn at or above the LEL but below the Primary Threshold), and whether employees qualify for certain statutory payments. SSP eligibility has changed separately under the ERA 2025 (covered below), but the LEL still feeds into pension auto-enrolment qualifying earnings calculations and year-to-date NIC records. An incorrect LEL in your payroll software produces discrepancies in employee pension records, the kind of error that surfaces at year-end and requires a corrective Full Payment Submission (FPS) to HMRC.
The bigger story for 2026/27 is that this is the first full financial year where most businesses are budgeting with the higher employer NIC rate and lower Secondary Threshold embedded across twelve months. The rate change happened in April 2025, but many businesses entered 2025/26 mid-planning cycle and only absorbed the partial-year cost. The full-year impact is now visible in workforce budgets, and for organisations that have not revisited their cost modelling, the numbers may surprise.
Employer Cost Modelling at Key Salary Levels
The table below shows annual employer NIC liability at common salary levels under the 2026/27 rates (15% above £5,000), before applying Employment Allowance.
Annual employer NIC liability by salary level (2026/27, before Employment Allowance)
| Annual Salary | Employer NIC | NIC as % of Salary |
|---|---|---|
| £12,570 (NMW full-time, age 21+) | £1,136 | 9.0% |
| £20,000 | £2,250 | 11.3% |
| £25,000 | £3,000 | 12.0% |
| £30,000 | £3,750 | 12.5% |
| £36,036 (UK average earnings) | £4,655 | 12.9% |
| £50,000 | £6,750 | 13.5% |
| £70,000 | £9,750 | 13.9% |
| £100,000 | £14,250 | 14.3% |
Employer NIC charged at 15% on earnings above the £5,000 Secondary Threshold. Source: HMRC.
Employer NIC charged at 15% on earnings above the £5,000 Secondary Threshold. Source: HMRC.
For an employee on average UK earnings of £36,036, the Deloitte analysis of the original Budget measure showed the combined effect of the rate rise and threshold reduction increased employer contributions from £3,715 in 2024/25 to £4,655 in 2025/26, a 25% increase that carries forward unchanged into 2026/27.
For a team of 50 employees averaging £36,036, the annual employer NIC bill is approximately £232,750. Multiply that across different headcount or salary mix scenarios to understand the budget exposure.
One variable worth modelling separately: the NMW increase to £12.71 per hour from 1 April 2026 (for workers aged 21 and above) pushes more employees into higher NIC bands, even where salaries have not been increased by discretion.
Employment Allowance: Who Can Claim in 2026/27?
Employment Allowance remains at £10,500 for 2026/27, and the previous £100,000 NIC liability cap that restricted eligibility has been removed. All eligible employers can now claim, regardless of the size of their total NIC bill.
The allowance offsets your cumulative employer Class 1 NIC liability across the year. You claim it through your payroll software at the start of the tax year (or when you become eligible) by submitting an Employer Payment Summary (EPS) to HMRC. The allowance reduces what you pay each month until it is exhausted; HMRC does not send a refund.
Who cannot claim:
- Employers whose sole employee is also a director of the company (single-director companies)
- Public bodies funded by public funds (excluding charities)
- Employers with domestic workers who are only employed in a personal capacity
For a business with five employees earning £25,000 each, the annual employer NIC bill comes to £15,000. After Employment Allowance, the net liability is £4,500, meaning these employers are largely shielded from the 2025/26 rate change.
Worth noting: the allowance is claimed per employer, not per PAYE scheme. If you operate multiple PAYE references, you can only claim against one of them.
NIC Category Letters and Reduced Rates
Most employees fall under category letter A, the standard rate. Certain employee groups attract a zero employer NIC rate up to the relevant upper threshold, which significantly reduces the cost of employing them.
Employer NIC by category letter (2026/27)
| Category | Description | Employer NIC above Secondary Threshold, up to Upper Secondary Threshold |
|---|---|---|
| A | Standard employee | 15% |
| H | Apprentice under 25 | 0% up to £50,270, then 15% |
| M | Employee under 21 | 0% up to £50,270, then 15% |
| V | Veteran (first year of civilian employment) | 0% up to £50,270, then 15% |
Categories H, M and V attract 0% employer NIC up to the Upper Secondary Threshold of £50,270. Source: HMRC.
Most employees fall under category letter A, the standard rate. Certain employee groups attract a zero employer NIC rate up to the relevant upper threshold, which significantly reduces the cost of employing them.
For employers hiring apprentices or workers under 21, the NIC saving is material. An apprentice earning £25,000 costs £0 in employer NICs, compared to £3,000 under category A. That is a saving worth factoring into workforce planning, particularly for growing teams.
Freeport and Investment Zone category letters (F, I and related) carry a zero employer NIC rate up to the higher Freeport/Investment Zone upper secondary threshold of £25,000 per year. If you have employees working at a qualifying Freeport or Investment Zone, verify category assignment in your payroll system.
Class 1A and 1B: Expenses, Benefits and PSAs
The Class 1A rate on benefits in kind (P11D benefits) and Class 1B rate on PAYE Settlement Agreements (PSAs) are both 15% for 2026/27, unchanged from 2025/26.
Class 1A is paid annually, by 22 July (online payment) or 19 July (cheque) following the end of the tax year. It applies to most non-cash benefits reported on P11Ds: company cars, private medical insurance, non-trivial gifts, and so on.
From 6 April 2026, HMRC has introduced tax and NIC exemptions for certain employer-funded health benefits and homeworking equipment. Specifically, employer reimbursements for homeworking equipment, eye tests, and flu jabs become tax and NIC exempt when processed through payroll, provided they meet the relevant conditions. This is worth reviewing if your business operates benefit schemes covering these categories, as the exemption removes the previous administrative burden of P11D reporting for these items.
If your employees previously claimed homeworking tax relief via their tax code, that route closes from 6 April 2026. The only available relief is now through employer-provided and employer-funded arrangements processed through payroll.
SSP Changes Under the Employment Rights Act 2025
The ERA 2025 introduces the most significant changes to Statutory Sick Pay since the current scheme was established. Both changes took effect on 6 April 2026 and require payroll system updates independent of the NIC rate cycle.
Day-one SSP entitlement. The three-day waiting period is abolished. SSP is now payable from the first full day of sickness absence. Previously, SSP only began on the fourth qualifying day; the first three days were unpaid. This change increases the cost of each short-term sickness episode, and in workplaces with higher rates of one-to-two-day absences, the aggregate impact can be significant.
Lower Earnings Limit removed as an SSP eligibility condition. Previously, employees had to earn at or above the LEL (£129 per week in 2026/27) to qualify for SSP. That earnings floor has been removed. Employees earning below the LEL now receive the lower of the SSP flat rate (£123.25 per week from 6 April 2026) or 80% of their average weekly earnings, whichever is lower. The government estimates this brings approximately 1.3 million additional workers into SSP eligibility.
For most employers already offering contractual sick pay from day one, the practical payroll impact is limited. The highest exposure is for employers operating SSP-only policies, particularly those with high proportions of part-time, zero-hours, or lower-paid workers.
What payroll teams need to update:
- Remove any system logic that enforces a three-day waiting period before SSP is triggered
- Update SSP eligibility calculations to remove the LEL earnings check
- Configure the 80% average weekly earnings calculation for lower-earning employees, with the £123.25 weekly cap as the ceiling
- Update sickness absence policies, employment contracts, and employee communications to reflect day-one eligibility
The Small Employers Relief (SER) compensation rate also changes. From 6 April 2026, qualifying small employers (those with a Class 1 NIC bill of £45,000 or less in the previous tax year) can recover 100% of statutory parental pay plus a compensation supplement that rises from 8.5% to 9%, giving a total recovery of 109%. This is worth checking if your business sits close to the SER threshold.
Salary Sacrifice: The Change Coming in 2029
This does not affect 2026/27 payroll, but finance teams planning three-year workforce cost models need to account for it now. The government has announced a cap on the NIC relief available through salary-sacrifice pension contributions: from 2029, salary sacrifice contributions above £2,000 per employee will attract both employer and employee NICs.
Salary sacrifice has been one of the most effective tools for reducing employer NIC liability. Each £1 of salary exchanged for pension contribution saves 15p in employer NICs at current rates. For employers running enhanced pension schemes, the cap will erode a meaningful portion of that saving for higher-contributing employees.
No action is required now. What is worth doing is modelling the 2029 impact against your current scheme design, so any benefit restructuring happens as a considered decision rather than a reactive one.
Payroll System Checklist for 2026/27
Before the first payroll run of the new tax year (and ideally before the next run if you have not already done this), verify each of the following:
NIC thresholds and rates
- Employer NIC rate confirmed at 15% for category A employees
- Secondary Threshold set to £96 per week / £417 per month / £5,000 per year
- LEL updated to £129 per week / £559 per month / £6,708 per year
- Upper Earnings Limit confirmed at £967 per week / £4,189 per month / £50,270 per year
- Reduced-rate thresholds for categories H, M, and V confirmed at £50,270 annually
- Freeport and Investment Zone upper secondary thresholds confirmed at £25,000 annually
Employment Allowance
- Employment Allowance claim submitted via EPS (if eligible)
- Eligibility verified (sole director companies cannot claim)
- Allowance tracked against cumulative employer NIC liability
SSP configuration
- Three-day waiting period removed from system logic
- LEL earnings check removed from SSP eligibility calculation
- 80% average weekly earnings calculation enabled for lower earners
- SSP flat rate confirmed at £123.25 per week
- Sickness absence policy updated to reflect day-one entitlement
Benefits and expenses
- Class 1A rate confirmed at 15% for 2026/27 P11D benefits
- Homeworking equipment, eye tests, and flu jabs reviewed for NIC exemption eligibility
- Employee homeworking relief via tax code confirmed as closed; employer-funded route configured if required
Payroll records and RTI
- Year-to-date NIC figures verified at start of 2026/27 (especially where employer change occurred mid-year)
- NIC category letters reviewed for new starters under 21, apprentices, and veterans
- FPS submission process confirmed for new LEL to maintain accurate pension eligibility records
Fiscal Drag and the Hidden Cost Pressure
The income tax thresholds and the NIC Primary Threshold remain frozen until 2030/31 at £12,570. With wages rising, more employees move into higher tax bands each year, a mechanism described as fiscal drag. The government collects additional revenue without changing headline rates.
For employers, fiscal drag has a secondary effect. As employees’ real take-home pay shrinks relative to wage growth, pressure for salary increases builds. An employee who received a 4% pay rise in 2025/26 may have seen their effective tax rate increase at the same time, eroding part of that uplift. This feeds into compensation conversations, retention risk, and total reward strategy, particularly for HR directors managing cost alongside engagement.
The frozen Secondary Threshold adds a further layer. At £5,000, it is now well below minimum wage for any full-time worker. Every employee on a standard contract generates employer NICs from their first hour of work above this level. The threshold has not moved since April 2025 and will not move until at least 2030/31.
Key Takeaway
The 2026/27 NIC landscape is stable in rate terms, but that stability masks three real action points: the LEL update that must land correctly in your payroll system, the ERA 2025 SSP reforms that change who qualifies and when payments start, and the accumulated full-year cost burden from the April 2025 rate change that is now fully embedded in workforce budgets. Any employer who has not recalculated total employment costs since 2024/25 is likely carrying unplanned exposure.
Recommended next action: Run a cost-per-head model across your current headcount using the 2026/27 figures, then compare against your 2024/25 baseline. The delta will inform both headcount planning and compensation review cycles for the year ahead.
For employers managing payroll across multiple countries alongside UK obligations, TopSource’s global payroll services and Employer of Record solutions can simplify compliance across jurisdictions, including the statutory reporting and RTI obligations that sit alongside HMRC’s UK requirements. If you are expanding internationally or need support with multi-territory payroll, speak with our team.
Frequently Asked Questions
The standard employer Class 1 NIC rate is 15% on employee earnings above £5,000 per year (the Secondary Threshold). This rate also applies to Class 1A NICs on benefits in kind and Class 1B NICs on PAYE Settlement Agreements. The rate is unchanged from 2025/26 and will remain at 15% until at least 2030/31.
The Secondary Threshold is £5,000 per year (£96 per week or £417 per month), unchanged from 2025/26. Employers pay 15% NICs on each employee’s earnings above this point. The threshold was reduced from £9,100 in April 2025 and is now frozen until 2030/31.
Yes. The LEL increased from £6,396 to £6,708 per year (from £533 to £559 per month, or from £123 to £129 per week) from 6 April 2026. The increase reflects the September 2025 CPI rate of 3.8%. The LEL determines whether employees build a qualifying year for State Pension and feeds into payroll records for pension auto-enrolment.
The Employment Allowance is £10,500 for 2026/27, unchanged from 2025/26. The previous £100,000 NIC liability cap has been permanently removed, so all eligible employers can claim regardless of the size of their NIC bill. Single-director companies with no other employees cannot claim.
Yes. Unlike the employee NIC rate, which drops to 2% above the Upper Earnings Limit (£50,270), there is no upper earnings limit for employer NICs. The 15% rate applies to all earnings above £5,000 regardless of salary level. This is why high earners generate proportionally larger employer NIC costs.
From 6 April 2026, SSP is payable from the first day of sickness absence (the three-day waiting period is abolished) and the Lower Earnings Limit has been removed as an eligibility condition. Employees earning below the LEL now receive the lower of £123.25 per week or 80% of their average weekly earnings. Payroll systems must be updated to remove the waiting period logic and the LEL eligibility check.
Employees under 21 (category M), apprentices under 25 (category H), and qualifying veterans in their first year of civilian employment (category V) attract 0% employer NICs on earnings up to £50,270 per year. Above that threshold, the standard 15% rate applies. This is a meaningful cost saving for employers hiring in these categories.
Yes. From 6 April 2026, employer reimbursements for homeworking equipment, eye tests, and flu jabs are tax and NIC exempt when processed through payroll, subject to meeting the relevant conditions. At the same time, employees can no longer claim homeworking tax relief via their tax code. That route closed for the 2026/27 tax year.
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