National Insurance Explained

Why it's calculated per pay period, not across the year like Income Tax, and how that can leave two people on the same salary paying different totals

National Insurance (NI) is a second deduction from your pay, alongside Income Tax, but it works differently, is calculated differently, and funds different things (it's what builds your entitlement to the State Pension and certain benefits, rather than going into general taxation). If you're employed, it's taken automatically from your pay, the same way Income Tax is. This page is about those contributions. See Your Payslip Explained if you want to see where this line actually sits on a real payslip, alongside everything else. If you're looking for your National Insurance number instead, see Understanding Your National Insurance Number.

The bands, for 2026/27

Employee National Insurance (technically "Class 1, Category A" for most people) works in three tiers, based on your earnings:

Band	Weekly earnings	Annual equivalent	Rate
Below the Primary Threshold	Up to £242/week	Up to £12,570/year	0%
Primary Threshold to Upper Earnings Limit	£242–£967/week	£12,570–£50,270/year	8%
Above the Upper Earnings Limit	Over £967/week	Over £50,270/year	2%

Notice that the Primary Threshold (£12,570) is set at exactly the same level as the Income Tax Personal Allowance. That's not a coincidence, the two have been aligned since 2019, which is why a lot of people mentally lump Income Tax and NI together, even though HMRC calculates and reports them separately, and NI has its own set of rules.

Unlike Income Tax, National Insurance is calculated per pay period (usually per month), not cumulatively across the year. This mostly doesn't matter if your pay is steady, but it means someone with a very uneven income across the year (a big one-off bonus month, say) can end up paying a different total NI than someone who earned the same annual total but spread evenly, something Income Tax, calculated on an annual/cumulative basis, doesn't do. The worked example further down the page shows exactly how much this affects things.

Worked example: £35,000 salary

The first £12,570 is NI-free.
The remaining £22,430 (£35,000 − £12,570) falls in the 8% band.
NI due: £22,430 × 8% = £1,794.40 for the year.

Combined with the Income Tax worked example on the Income Tax page (£4,486), this £35,000 earner pays £6,280.40 in Income Tax and NI combined, leaving take-home pay of £28,719.60 before any pension or other deductions.

Worked example: £60,000 salary (crossing into the 2% band)

The first £12,570 is NI-free.
The next £37,700 (taking you up to £50,270) is taxed at 8% = £3,016.
The remaining £9,730 (£60,000 − £50,270) is taxed at 2% = £194.60.
Total NI due: £3,016 + £194.60 = £3,210.60 for the year.

This is one of the more counter-intuitive parts of the system: the NI rate drops to 2% for income above £50,270, rather than rising the way Income Tax bands do. So while your Income Tax marginal rate jumps from 20% to 40% at that threshold, your NI marginal rate actually falls from 8% to 2%. The two partially offset each other, useful to keep in mind if you're trying to estimate the effect of a pay rise around that point.

Worked example: same salary, different pay pattern

Because NI is worked out fresh each pay period rather than cumulatively, two people can earn exactly the same amount over a year and still end up with different total NI bills, depending on how that pay is spread out. This uses the same monthly thresholds as above (£1,048 tax-free, then 8% up to £4,189, then 2%), applied separately to each month's pay rather than to a running annual total.

Person A: steady pay. Earns £5,000 every month, £60,000 for the year.

Each month: £1,048 tax-free, then 8% on the next £3,141 (£251.28), then 2% on the remaining £811 (£16.22) = £267.50 a month.
Over 12 months: £3,210.00 for the year, matching the annual £60,000 example above (the small 60p difference is just rounding in the published monthly threshold figures).

Person B: uneven pay. Earns £4,000 a month for 11 months, then a £16,000 bonus in month 12, also £60,000 for the year.

Each £4,000 month: £1,048 tax-free, then 8% on the remaining £2,952 (£236.16). Pay doesn't reach £4,189, so no 2% band applies = £236.16 a month, × 11 months = £2,597.76.
The £16,000 bonus month: £1,048 tax-free, 8% on the next £3,141 (£251.28), then 2% on the remaining £11,811 (£236.22) = £487.50 for that month alone.
Total for the year: £2,597.76 + £487.50 = £3,085.26.

Same £60,000 salary, but Person B pays £124.74 less NI over the year than Person A, purely because a large chunk of their income landed in one month, pushing more of it into the cheaper 2% band for that period, rather than being spread evenly across the 8% band all year. Income Tax wouldn't behave this way at all: because it's calculated cumulatively across the year (see Income Tax Explained), both people would pay exactly the same Income Tax regardless of how their pay was timed. This quirk is also why company directors, who often take pay in an irregular pattern, can elect to have their NI calculated annually instead of per period, to avoid the calculation being sensitive to timing either way.

What NI actually buys you

Unlike Income Tax, which goes into general government spending, your NI record is tracked individually and determines your entitlement to the State Pension and some contributory benefits (like certain rates of Jobseeker's Allowance). You typically need 35 qualifying years of NI contributions (or credits) for the full new State Pension, and at least 10 years for any State Pension at all. This is part of why very low earners below the Primary Threshold can still get a "qualifying year" through NI credits in some circumstances (for example, if you're claiming Child Benefit) even though they're not actually paying NI.

Can you reduce how much NI you pay?

Not through most pension contribution methods as relief at source and net pay arrangement both leave your National Insurance untouched, since NI is calculated on your salary regardless of what you contribute to a pension via those routes. Salary sacrifice is the exception: because it genuinely reduces your contractual salary, it lowers your NI bill too, not just your Income Tax. See Your Pension Contributions Explained for how that works and how the three methods compare.

Student loan repayments use the same earnings figure as NI

If you have a student loan, repayments are calculated on the same gross pay figure as National Insurance, not the same figure Income Tax uses. That's why salary sacrifice is also the only pension method that reduces student loan repayments, for exactly the same reason it reduces NI. See Student Loan Repayments Explained for how repayments themselves are worked out.

Statutory pay and redundancy pay have their own NI treatment

Statutory Sick Pay and Statutory Maternity/Paternity/Adoption/Shared Parental Pay still have NI deducted the normal way. See Statutory Pay Explained for the rates. Redundancy pay is different: no employee NI is due on any part of it, though your employer pays Class 1A NI on anything above the £30,000 tax-free threshold. See Redundancy Pay Explained.

This page explains general National Insurance rules for employees and is not personalised advice; see the disclaimer.