Employer National Insurance Explained
Employer National Insurance is one of the biggest and most overlooked costs of hiring in the UK — often adding well over £2,000 a year to the cost of a typical full-time salary once you factor it in. This guide covers exactly how it's calculated for 2026/27, who's eligible for the £10,500 Employment Allowance, and the reliefs that can significantly cut the bill for smaller employers.
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Dividend Tax Calculator →What Is Employer National Insurance?
National Insurance on a payslip is actually two separate charges: employee NI, deducted from the worker's pay, and employer NI (officially "secondary Class 1 National Insurance"), which the employer pays on top of gross salary and never comes out of the employee's take-home pay. It's a genuine additional cost of employment, calculated on each employee's earnings above a threshold, and paid to HMRC alongside Income Tax and employee NI through the normal PAYE process.
Unlike Income Tax and employee NI, employer NI has no upper limit — it applies at the same 15% rate however much an employee earns above the threshold, with no reduced rate at higher salary levels the way employee NI steps down to 2% above the Upper Earnings Limit.
2026/27 Rates & Thresholds
| Item | 2026/27 figure |
|---|---|
| Employer NI rate | 15% |
| Secondary threshold (where employer NI starts) | £5,000/year (£417/month, £96/week) |
| Employment Allowance | £10,500/year |
| Class 1A rate (benefits in kind) | 15% |
| Class 1B rate (PAYE Settlement Agreements) | 15% |
| Apprenticeship Levy | 0.5% of pay bill over £3m, less £15,000 allowance |
The £5,000 secondary threshold is significantly lower than the £12,570 employee NI threshold — meaning employer NI starts biting well before an employee reaches the point where they personally start paying tax or NI. This gap was widened at the Autumn Budget 2024 specifically to increase employer NI revenue, and remains unchanged for 2026/27.
The Employment Allowance
The Employment Allowance is one of the most valuable and most under-claimed reliefs available to small employers. For 2026/27, it lets eligible employers reduce their total annual employer Class 1 NI bill by up to £10,500 — meaning many small businesses with just a handful of employees pay little or no employer NI at all.
To qualify, your employer NI liability in the previous tax year must have been under £100,000 (checked across all connected companies, not per company), and — crucially — a limited company where the director is the only employee paid above the secondary threshold cannot claim it. This "sole director" restriction catches out a lot of one-person limited companies who assume they're automatically eligible.
The allowance is claimed through your payroll software as you go through the tax year, offsetting your employer NI bill in real time rather than being reclaimed afterwards, and most modern payroll software applies it automatically once you confirm eligibility in your settings.
Interactive: Estimate Your Employer NI
Enter an employee's annual gross salary to see the employer NI cost, and how much of that the Employment Allowance could cover if you're eligible and have allowance remaining.
Employer NI Estimator
Reliefs for Under-21s, Apprentices & Veterans
Several categories of employee are exempt from employer NI up to a much higher threshold than the standard £5,000 — specifically the upper secondary threshold of £50,270 for 2026/27. This means no employer NI is due at all on earnings up to £50,270 for:
- Employees under 21 (category letter M)
- Apprentices under 25 on an approved apprenticeship standard (category letter H)
- Qualifying veterans in their first year of civilian employment after leaving the armed forces (category letter V)
Above £50,270, the normal 15% rate applies as usual. These reliefs require using the correct NI category letter in your payroll software — using the standard "A" category by mistake for an eligible employee means overpaying employer NI unnecessarily, so it's worth double-checking category letters when onboarding a young employee, apprentice or veteran.
Separate, more generous reliefs also exist for employers in Freeport and Investment Zone tax sites, with a higher upper secondary threshold of £25,000 for qualifying employees — a niche but valuable relief for businesses operating in one of the UK's designated Freeport or Investment Zone locations.
Class 1A, Class 1B & the Apprenticeship Levy
Class 1A National Insurance is a separate employer-only charge on most benefits in kind you provide — company cars, private medical insurance, and similar perks — also charged at 15% for 2026/27, reported annually on the P11D(b) and paid by 19 July (22 July if paying electronically) after the tax year ends.
Class 1B National Insurance applies only if you have a PAYE Settlement Agreement (PSA) with HMRC, letting you make one annual payment covering both tax and NI on small, irregular, or hard-to-value benefits, rather than reporting them individually — also charged at 15% for 2026/27.
The Apprenticeship Levy is a separate charge entirely, applying only to employers (or groups of connected employers) with an annual pay bill above £3 million, at 0.5% of the total pay bill less a £15,000 annual allowance. The large majority of small and medium UK employers never pay this at all, since a £3 million pay bill typically means upwards of 60-100 employees depending on average salary.
💰 See the True Cost of a New Hire
Work out full take-home pay and employer cost for any salary.
Take-Home Pay Calculator →Worked Example: A Small Employer With Three Staff
Consider a small business with three employees earning £28,000, £32,000 and £45,000 respectively — none under 21, none apprentices. Employer NI on each is calculated at 15% of earnings above the £5,000 secondary threshold: £3,450 on the £28,000 salary, £4,050 on the £32,000 salary, and £6,000 on the £45,000 salary, for a combined employer NI bill of £13,500 before any relief.
If this employer is eligible for the Employment Allowance, the first £10,500 of that £13,500 bill is wiped out entirely, leaving just £3,000 actually payable to HMRC across the whole year — a saving of over three-quarters of the total employer NI cost. For many small employers with two or three staff on typical salaries, the Employment Allowance genuinely is the difference between employer NI being a minor line item and a substantial one, which is exactly why checking eligibility (and making sure payroll software has it switched on) is worth doing carefully rather than assuming it's automatic.
Scale the same business up to ten employees on similar salaries, and the picture changes: employer NI before relief would run to roughly £45,000, of which the £10,500 allowance now covers less than a quarter — illustrating why the Employment Allowance matters disproportionately more for the smallest employers, and why it tapers into relative insignificance as a business grows its headcount.