Employer National Insurance: Rates and Employment Allowance
Employer National Insurance is the cost of employing someone that never appears on their payslip. This explainer is for UK employers in the 2026/27 tax year: it covers the 15% rate, the £5,000 threshold, how the Employment Allowance cuts the bill and who cannot claim it.
Key takeaways
- Employers pay National Insurance at 15% on each employee's earnings above £5,000 a year (£96 a week), with no upper limit.
- The Employment Allowance can reduce your employer NI bill by up to £10,500 a year.
- The old £100,000 eligibility cap was removed from April 2025, so more businesses can now claim.
- A company whose only employee paid above the threshold is a director cannot claim the allowance.
- You claim through your payroll software, using an Employer Payment Summary.
When you set a salary, it is tempting to think of it as the cost of the role. In the UK it is not. On top of gross pay you pay employer National Insurance contributions, known as secondary Class 1 contributions, plus workplace pension contributions and other costs. For many small employers, employer NI is the largest of these extras.
The good news is that most small businesses can reduce or even wipe out the bill through the Employment Allowance. This explainer covers how employer NI is calculated, how the allowance works and the planning points worth knowing. It is general information, not tax advice. Rates and thresholds change, so check GOV.UK or ask an accountant before making decisions.
How employer National Insurance works
Employer National Insurance is charged on each employee's earnings above a threshold, called the secondary threshold. For the 2026/27 tax year, starting 6 April 2026, the key figures are:
| Item | 2026/27 figure |
|---|---|
| Employer NI rate | 15% |
| Secondary threshold (annual) | £5,000 |
| Secondary threshold (weekly) | £96 |
| Upper limit for employers | None |
| Employment Allowance | Up to £10,500 a year |
A few points matter in practice:
- It is per employee. The threshold applies to each employee separately, so two part-time staff each have their own £5,000 band before employer NI starts.
- It is calculated per pay period. Payroll software applies the weekly or monthly equivalent of the threshold each time you pay, rather than waiting until the end of the year. Directors are an exception, as their NI is usually worked out on an annual basis.
- There is no cap. Employees pay a lower rate on earnings above an upper limit, but employers keep paying 15% on every pound above the threshold.
- Employees pay their own share. Employees pay their own National Insurance, with a main rate of 8% on earnings within the main band. That is deducted from their pay and is separate from your employer cost.
Worked examples: what employer NI costs
The quickest way to understand employer NI is to run the numbers. These examples use annual figures for simplicity; real payroll works per pay period.
Worked example
For example, imagine a full-time employee earning £30,000 a year. Earnings above the threshold are £30,000 minus £5,000, which is £25,000. Employer NI is 15% of £25,000, or £3,750 a year. Now imagine a part-time employee on £12,000. Earnings above the threshold are £7,000, so employer NI is £1,050. Together the two cost £4,800 in employer NI before any Employment Allowance.
Now add the Employment Allowance. If the business is eligible, the first £10,500 of its employer NI bill for the year is covered. In the example above, the £4,800 bill would be fully offset, and the business would pay no employer NI for the year. A larger business with an employer NI bill of, say, £25,000 would still pay the remaining £14,500.
Pro tip
When budgeting for a new role, work out employer NI before and after the Employment Allowance. If the allowance is already used up by existing staff, the full 15% applies to the new hire, so the true cost per employee rises as you grow.
The Employment Allowance explained
The Employment Allowance is a reduction in your annual employer Class 1 National Insurance bill. It does not reduce employees' own NI, and it does not cover other taxes.
Who can claim
Most businesses and charities that employ staff and pay employer NI can claim. The previous rule that limited the allowance to employers with an employer NI bill under £100,000 in the previous tax year was removed from April 2025. That change opened the allowance to many growing businesses that were previously excluded.
Who cannot claim
- Single-director companies: a company whose only employee paid above the secondary threshold is a director cannot claim. This catches many one-person limited companies.
- Other exclusions: some public bodies and employers whose staff do mostly public sector work, and some employment of personal or domestic staff, are excluded. Connected companies generally share a single allowance. Check the full rules on GOV.UK before claiming.
Common mistake
Claiming the allowance as a one-person limited company where the director is the only employee paid above the threshold. HMRC can remove the allowance and ask for the unpaid NI. If you take on a second employee paid above £96 a week, eligibility can change, so review it each year.
How to claim the Employment Allowance
Claiming is done through your payroll software, not as a separate application.
- Check eligibility. Confirm you are not a single-director company and not otherwise excluded. If you are part of a group of connected companies, decide which one claims.
- Tick the box in your payroll software. Most software includes an Employment Allowance setting. HMRC Basic PAYE Tools, which is free for employers with fewer than 10 employees, supports it too.
- Send an Employer Payment Summary (EPS). The claim is sent to HMRC on an EPS. EPS submissions are due by the 19th of the following tax month.
- Let the allowance offset your payments. Your employer NI is reduced in each month until the £10,500 is used up. You then pay employer NI as normal for the rest of the year.
- Reclaim each year. Check whether your software carries the claim forward or whether you need to claim again at the start of each tax year.
If you forget to claim, you may be able to claim for earlier tax years. Ask your accountant or check GOV.UK for the current time limits.
Planning points for small employers
Employer NI affects decisions far beyond payroll. These are the areas where it most often matters.
Pricing and hiring
Build employer NI into your hourly cost when you price jobs or quote for contracts. A role paid at the National Living Wage of £12.71 an hour from 1 April 2026 costs you more than that once NI and pension contributions are added. Work out the true hourly cost before you set prices.
Salary sacrifice
Under a salary sacrifice arrangement, an employee gives up part of their salary in exchange for a benefit, such as higher pension contributions. Because the cash salary is lower, both the employee and the employer may pay less National Insurance. These arrangements have rules and can affect other entitlements, and the tax treatment of salary sacrifice can change in future budgets, so take advice before setting one up.
Directors' pay
Owners of limited companies often balance salary and dividends. The £5,000 secondary threshold, the 15% rate and whether the company can claim the Employment Allowance all change the most efficient mix. An accountant can model this for your situation.
Paying on time
Employer NI is paid to HMRC together with PAYE income tax and employee NI. Payment is due by the 22nd of the next tax month if you pay electronically (19th by post). Small employers expecting to pay less than £1,500 a month can pay quarterly. Late payment can bring penalties and interest.
If you claim the Employment Allowance, your payments will be lower, or nil, in the early months of the tax year until the allowance runs out. Plan your cash flow for the jump in payments later in the year, when the full employer NI bill returns. Keep your payroll records for 3 years, including the EPS confirming your claim, so you can answer any HMRC questions about eligibility quickly.
Employer NI action checklist
- Confirm your payroll software uses the 2026/27 rate (15%) and threshold (£5,000 a year)
- Check whether your business is eligible for the Employment Allowance
- Claim the allowance through your payroll software on an EPS
- If you are part of a group, agree which company claims
- Include employer NI and pension costs in every new hire budget
- Review prices and quotes using the true cost of each hour worked
- Ask your accountant about directors' pay and salary sacrifice
- Pay PAYE and NI by the 22nd of the next tax month
Frequently asked questions
Do I pay employer NI for staff earning under £5,000 a year?
No employer NI is due on earnings up to the secondary threshold, which is £96 a week or £5,000 a year. You still need to run payroll and report their pay to HMRC through RTI where required.
Is the Employment Allowance worth claiming if my bill is small?
Yes. If your employer NI bill is below £10,500 for the year, the allowance can cover all of it. Claiming takes a few minutes in your payroll software.
Does the Employment Allowance cover Class 1A National Insurance on benefits?
No. The allowance applies to employer Class 1 National Insurance on earnings. Class 1A on benefits in kind is reported and paid separately. Check the detail with your accountant.
Can a sole trader claim the Employment Allowance?
Yes, if you employ staff and pay employer NI on their earnings. The allowance does not reduce your own self-employed National Insurance.
Related reading
The bottom line
For 2026/27, employer National Insurance is 15% on each employee's earnings above £5,000 a year, with no upper limit. That makes it a real part of the cost of every hire, and one that grows as you add staff.
The Employment Allowance takes up to £10,500 off the bill each year, and since the £100,000 cap was removed, most employers with staff can claim, except companies where a director is the only employee paid above the threshold. Check your eligibility, claim it through payroll and build the remaining cost into your prices and hiring plans.
