UK social security contributions paid by employees and employers.
National Insurance is a UK payroll contribution deducted from an employee's earnings by their employer, funding the State Pension and other contributory benefits. Employees pay Class 1 contributions, charged in bands that vary with what they earn in each pay period.
Class 1 employee National Insurance is charged in slices of each pay packet, not on annual salary as a single figure. For the 2026 to 2027 tax year, earnings from £242 to £967 a week (£1,048 to £4,189 a month) are charged at 8%, and earnings over £967 a week (£4,189 a month) are charged at 2%. Below the lower figure nothing is deducted. The employer takes it from wages before the employee is paid, so it lands on the payslip rather than being settled later through a return.
The bands are slices, not switches. Crossing £967 in a week does not reprice the whole wage at 2%; only the part above that point moves to the lower rate, and the money underneath it is still charged at 8%. That is also why a single high-earning week cannot produce a smaller total deduction than a lower-earning one.
| Weekly earnings (2026/27) | Monthly equivalent | Employee Class 1 rate |
|---|---|---|
| Up to £242 | Up to £1,048 | Nothing deducted |
| £242 to £967 | £1,048 to £4,189 | 8% |
| Over £967 | Over £4,189 | 2% |
Take a monthly salary of £6,000 in the 2026 to 2027 tax year. The first £1,048 carries no charge. The slice from £1,048 to £4,189 is £3,141, charged at 8%, which is £251.28. The remaining £1,811 sits above £4,189 and is charged at 2%, which is £36.22. Employee National Insurance for that month is £287.50.
Weekly Class 1 employee NI (2026/27) = 8% × (earnings between £242 and £967) + 2% × (earnings above £967) — monthly equivalent: 8% × (earnings between £1,048 and £4,189) + 2% × (earnings above £4,189)
A colleague on exactly £4,189 a month pays £251.28 — all of it at 8%, and 6.0% of their gross pay. The £6,000 earner pays more in cash but only 4.79% of gross. National Insurance is one of the few deductions where the effective rate falls as earnings rise, and it keeps falling: every extra £1,000 a month above the upper limit costs £20 rather than £80.
The consequence matters more than the rationale. Because the marginal rate drops from 8% to 2% at the upper limit, the employee National Insurance cost of a pay rise falls sharply once someone is above it: an extra £1,000 a month costs them £20 rather than £80. Any model of what a raise is worth in take-home terms has to account for which side of the limit it lands on.
Class 1 is worked out afresh for each pay period and never reconciled across the year, unlike PAYE income tax, which is cumulative. Two people with identical annual earnings can therefore pay different amounts. A large bonus paid in one month pushes more of that month's earnings above the upper limit, where only 2% applies, while someone paid evenly is charged 8% on the same money. Company directors are the exception: their contributions are worked out on an annual earnings period, which removes the effect.
The payslip line is also only the employee's share. The employer pays a separate secondary contribution on the same wages, which never appears as a deduction but is a real cost of employment, so budgeting a role from gross salary alone understates it. Salary sacrifice arrangements reduce the earnings the calculation runs on, which is why two employees on the same headline salary can show different deductions.
In the 2026 to 2027 tax year, nothing is charged on the first £1,048. The slice from £1,048 to £4,189 (£3,141) is charged at 8%, giving £251.28, and the £1,811 above £4,189 is charged at 2%, giving £36.22. The employee Class 1 deduction is £287.50 for that month, taken by the employer before payment.
Because the rate falls rather than rises at the top band. In 2026/27, earnings between £1,048 and £4,189 a month are charged at 8%, but everything above £4,189 a month is charged at only 2%. Once a large part of your pay sits in that upper slice, your contribution as a percentage of gross pay drops, even though the cash amount is higher than your colleague's.
No. They use separate thresholds and are worked out on different bases: income tax is cumulative across the tax year, while Class 1 National Insurance is calculated separately on each pay period and not reconciled at year end. National Insurance also applies to earnings from work rather than all income, and it builds entitlement to contributory benefits such as the State Pension.
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