Employer NI 2026/27 | Rate, Threshold, Employment Allowance & Class 1A

Employer National Insurance is a payroll cost that normally sits on top of salary. For 2026/27 the Class 1 secondary rate is 15% on earnings above the £5,000 secondary threshold, with no general upper cap — unlike employee NI, which has an upper earnings limit for the standard category. Eligible employers can offset up to £10,500 of that bill with the Employment Allowance, and benefits in kind add Class 1A at 15% on top.

Getting the figures right matters for budgeting and hiring: a £35,000 employee costs roughly £4,500 in employer NI before any allowance. Model the full cost with the Employer NI Calculator→, and check take-home pay alongside with the Salary Calculator→.

Rates and Thresholds for 2026/27

The £5,000 secondary threshold is deliberately low: employer NI starts once annual earnings pass about £96 a week. There is no upper limit, so every additional pound of salary above the threshold carries 15% employer NI — a cost that rises without relief as pay grows. The reduced upper thresholds for under-21s and under-25 apprentices are the main exception, giving 0% employer NI on their earnings up to £50,270.

How Employer NI Is Calculated

Employer NI = 15% × (earnings − secondary threshold) per pay period. On a £35,000 salary paid monthly: monthly earnings £2,916.67, threshold £416.67, chargeable £2,500, employer NI £375 a month — £4,500 a year. The Employment Allowance then wipes out the whole bill for most eligible small employers. The calculation is run through Real-Time Information on every payday, so the payroll software does the arithmetic; the management task is keeping the threshold, allowance and employee categories correct.

The Employment Allowance

The £10,500 allowance reduces employer NI liability, not salary. Eligibility depends on the employer type, public-sector work, connected-employer rules and the single-director test. A limited company cannot claim if one director is the only employee liable for secondary Class 1 NI, while charities and community amateur sports clubs can qualify subject to the published rules. The allowance is claimed through payroll software and cannot exceed the year's eligible employer NI bill, so a £4,500 bill becomes £0 with unused allowance remaining. The former £100,000 previous-year liability cap was removed from April 2025; a high prior-year bill is not by itself a reason to exclude a claim.

Class 1A and Class 1B

Class 1A is employer NI on the taxable value of most benefits in kind — company cars, private medical insurance, gym memberships, interest-free loans over £10,000 — charged at 15% and reported annually on form P11D(b) by 6 July. A £9,000 company car benefit costs £1,350; a £1,200 medical policy costs £180. Class 1B applies to items settled through a PAYE Settlement Agreement (staff parties, minor benefits), at the same 15% on the grossed-up value. Neither is payable through RTI; both arrive as an annual bill.

The Real Cost of an Employee

Example. Maria employs James at £35,000 and provides private medical insurance worth £1,200.

Without the allowance the employer NI would be £4,500; with it, the bill is £180 — the allowance has removed almost the entire NI cost. The pension and Class 1A remain, which is why salary sacrifice pensions are popular: an employer pension contribution avoids the 15% employer NI that cash salary attracts, and it is outside the Class 1A net entirely.

Under-21s and Apprentices in Detail

Employers pay 0% Class 1 NI on earnings up to £50,270 for employees under 21 and apprentices under 25, using the upper secondary threshold and apprentice upper secondary threshold. The saving is material: a 19-year-old on £25,000 costs nothing in employer NI, where a 25-year-old on the same salary costs £2,760. The thresholds are per-employee, not per-company, and apply through RTI automatically when the correct NI category is used (categories C and H). Once the employee turns 21, or the apprenticeship ends, the standard £5,000 threshold applies — so review NI categories at every birthday and apprenticeship milestone.

Employer NI and Salary Sacrifice

Salary sacrifice converts cash salary into a non-cash benefit such as a pension contribution or an electric car. The sacrificed salary stops attracting employer NI, so the employer saves 15% on the swapped amount — and with pension contributions there is no Class 1A either, so the saving is total. An employee sacrificing £5,000 into their pension saves the employer £750 in NI, which well-run schemes share back through higher contributions. The counterweight is the pension annual allowance of £60,000 and the minimum wage floor: sacrificed pay cannot take an employee below the National Living Wage.

Common Payroll Mistakes

The standard errors are using the wrong secondary threshold (a £9,100 figure from earlier years is not valid for 2026/27 — it is £5,000), missing the Employment Allowance claim, forgetting to update NI categories when employees turn 21 or apprentices finish, and treating a salary paid but not RTI-reported as deductible. Benefits in kind are the other blind spot: a car or medical policy reported late on P11D(b) still carries Class 1A plus interest. Reconcile the RTI cumulative totals each quarter so year-end corrections are small.

What Hasn't Changed

For 2026/27 the rate, thresholds and allowance are stable rather than moving: the 15% secondary rate applies, the £5,000 secondary threshold is frozen, the £50,270 upper thresholds for under-21s and apprentices are unchanged, and the £10,500 Employment Allowance carries over. That stability makes multi-year payroll budgeting easier, but it also means the freeze quietly raises effective payroll costs every year as wages inflate against a fixed threshold — worth building into salary review conversations and hiring plans.

Payroll controls and year-end evidence

Keep a payroll control sheet showing each employee's NI category, date of birth, apprenticeship status, pay period, secondary-threshold treatment and benefits reported. Review category changes before the first payroll after a birthday or the end of an apprenticeship. A payroll system can apply the wrong category consistently if the underlying employee record is not updated, so compare the output with the employer guidance rather than relying only on an automatic calculation.

For Employment Allowance, retain the eligibility decision, connected-company review, claim date and the amount used. The allowance reduces eligible secondary Class 1 liability as it arises; it does not erase an employer's responsibility to submit RTI or pay Class 1A and Class 1B. If a group structure, public-sector contract or director-only arrangement changes, revisit the claim rather than carrying it forward without review.

At year end, reconcile RTI reports, payroll journals, payment records, P11D(b), PAYE Settlement Agreement figures and the HMRC account. Separate salary NI from benefits NI and from the allowance offset. If a correction is needed, document the affected pay periods and tell employees where their benefit or payroll records change. This evidence is useful for budgeting, HMRC queries and deciding whether a salary, pension or benefit arrangement has produced the expected employer cost.

Keep the calculation by tax year, because a threshold or rate change must not be blended into the next year's payroll model.

Hiring and Pay-Change Decisions

Use the employer NI calculation as one line in the hiring budget, not as the whole employment cost. Compare gross salary, employer pension contributions, statutory payments, benefits, Class 1A or Class 1B exposure, Employment Allowance usage and the timing of the first payroll. A salary that appears below a threshold can still produce a different annual result when paid irregularly, when the employee changes category, or when a benefit is provided separately.

For a new employee, record the NI category, date of birth, apprenticeship status, start date, pay frequency and expected annual pay before the first RTI submission. For a salary increase or bonus, model both the pay-period effect and the annual total. Do not assume that unused threshold in one month can be freely carried to another employee; the threshold and special category rules apply to the relevant employment and payroll calculation.

When comparing salary sacrifice with cash salary, document the minimum-wage check, pension annual allowance, benefit terms and whether the employer shares any NI saving. A calculator can show the arithmetic under stated assumptions, but the payroll record, HMRC category and allowance decision determine the liability. Revisit the model after a birthday, apprenticeship completion, group restructure, new benefit or change in Employment Allowance eligibility.

Frequently Asked Questions

Model the cost with the Employer NI Calculator→ and the Salary Calculator→. Pair this guide with National Insurance 2026/27 and Apprenticeship Levy 2026/27 for the full payroll-tax picture.

Official sources

• GOV.UK: Rates and thresholds for employers 2026 to 2027
• GOV.UK: National Insurance rates and categories
• GOV.UK: Employment Allowance eligibility
• GOV.UK: Expenses and benefits deadlines
• HMRC: Class 1A National Insurance 2026