Employer National Insurance Cost Calculator UK 2026

What is Employer National Insurance and how much do I pay in 2026/27?

Employer National Insurance (officially called Class 1 secondary contributions) is a payroll tax paid by UK employers on employee earnings above the Secondary Threshold. For 2026/27, employers pay 13.8% on earnings above £9,100 per year (£175/week, £758/month).

Unlike employee NICs which have different rates and upper limits, employer NICs are straightforward but expensive:

• 0% on the first £9,100 of each employee's annual earnings
• 13.8% on all earnings above £9,100—with no upper limit or cap

This means a £30,000 salary costs you an additional £2,884 in employer NICs (13.8% × (£30,000 - £9,100)). A £100,000 salary costs £12,544 in employer NICs. This is in addition to the employee's gross salary and is not deducted from their pay—it's a pure employment cost to your business.

You calculate and pay employer NICs through your payroll software each time you run payroll (weekly, monthly, etc.) and submit them to HMRC via Real Time Information (RTI) reporting.

What is the Employment Allowance and am I eligible for 2026/27?

The Employment Allowance for 2026/27 is £5,000 per year, directly reducing your employer NIC bill by up to this amount. It's a government scheme to reduce employment costs for small businesses.

Eligibility criteria:

• Your employer NIC liability in the previous tax year was under £100,000
• You are not a company with only one employee who is also a director (sole director companies are excluded)
• You are not employing someone for personal, household, or domestic purposes
• Your business is not operating in the public sector (with some exceptions for charities)

Who CAN claim: Sole traders with employees, partnerships, limited companies with 2+ employees, charities, care providers, most small to medium businesses.

Who CANNOT claim: Sole director companies with no other employees, individuals employing carers/domestic staff, businesses that paid £100k+ employer NICs last year, some public sector organisations.

How to claim: You must actively claim the allowance through your payroll software or directly with HMRC. It's offset against your employer NICs throughout the year. The £5,000 is per business, not per employee—you can only claim once regardless of how many employees you have.

Pro tip: If you're a sole director considering hiring your first employee, even a part-time employee earning £12,000+ makes you eligible for the £5,000 allowance, often covering more than the additional salary cost in NIC savings.

How do I reduce my employer National Insurance costs legally?

There are several legitimate HMRC-approved strategies to minimise employer NIC liability while staying fully compliant:

1. Claim the £5,000 Employment Allowance if eligible (see above). This is the single biggest instant saving available to most small businesses.

2. Use salary sacrifice schemes for pensions, electric vehicles, or cycle-to-work. These reduce gross salary before NICs are calculated, saving both employer (13.8%) and employee (8-12%) NICs. A £3,000 pension contribution via salary sacrifice saves approximately £414 employer NICs plus £240-£360 employee NICs.

3. Optimise director remuneration with salary/dividend splits. Directors can take salary at or below the £9,100 Secondary Threshold (zero employer NICs) and extract remaining profits as dividends. While dividends have their own tax rates, they carry no NICs for employer or employee. Our Contractor Take Home Pay Calculator helps model optimal structures.

4. Consider apprenticeships for roles suitable for training. Employers pay zero NICs on earnings up to £50,270 for apprentices under 25, saving up to £5,661 per apprentice compared to standard employees.

5. Time bonuses strategically across tax years if it benefits overall planning. For example, spreading a large bonus across two tax years can sometimes preserve Employment Allowance eligibility if you're near the £100k threshold.

6. Pay employer pension contributions directly rather than increasing salary. Pension contributions are completely NIC-free (unlike salary which attracts 13.8% employer NICs). A £5,000 employer pension contribution costs £5,000; a £5,000 salary increase costs £5,690 (£5,000 + £690 NICs).

7. Review benefit structures. Some benefits attract 13.8% Class 1A NICs (company cars, private medical), while others are NIC-free (approved mileage, workplace parking, mobile phones). Consider whether cash allowances or NIC-free benefits deliver better value.

Important: All these strategies are legal and HMRC-approved. Avoid "umbrella" schemes or tax avoidance arrangements promising to eliminate NICs entirely—these are often disguised remuneration schemes that HMRC aggressively challenges, resulting in large retrospective tax bills and penalties.

Do I pay employer NI on pensions, benefits, or expenses?

The NIC treatment varies significantly depending on what you're providing:

NIC-FREE (no employer NICs payable):

• Employer pension contributions: No NICs on amounts paid directly into registered workplace pensions, regardless of size (subject to annual allowance limits for tax relief)
• Approved business expenses: Mileage allowances up to 45p/mile (first 10,000 miles), subsistence within HMRC rates, business travel, professional subscriptions
• Certain benefits: Mobile phones (one per employee), workplace parking, work-related training, annual staff parties (£150/head limit), employer-provided bicycles via cycle-to-work schemes
• Trivial benefits: Small gifts under £50, provided not cash/vouchers and not in employment contract

Class 1A NICs at 13.8% (paid annually):

• Company cars and fuel
• Private medical insurance
• Gym memberships (if available for private use)
• Interest-free or low-interest loans over £10,000
• Living accommodation provided (with exceptions for job-related accommodation)
• Most other taxable benefits reported on P11D forms

How Class 1A works: You report all taxable benefits on P11D forms by 6 July after the tax year ends. HMRC calculates the Class 1A NIC due (13.8% of total P11D value) and you must pay by 22 July (or 19 July if paying by post). Class 1A cannot be reduced by Employment Allowance.

Strategic planning: Because employer pension contributions are NIC-free, they're often more cost-effective than salary increases. Increasing salary by £1,000 costs £1,138 (salary + 13.8% NICs), but a £1,000 pension contribution costs exactly £1,000—a £138 saving per £1,000.

If you're evaluating total employment costs including benefits, combine this calculator with our Pension Contribution Calculator to model the true cost-benefit analysis of different remuneration packages.

What are the employer NI rates for directors and multiple employments?

Company Directors: Directors pay employer NICs at the same 13.8% rate above £9,100, but the calculation method differs significantly from standard employees:

• Annual earnings period: Directors' NICs are calculated cumulatively on an annual basis, not per pay period
• Flexibility: Directors can draw uneven amounts throughout the year without triggering unnecessary NICs, as long as total annual salary stays below £9,100 for zero employer NICs
• Optimisation opportunity: Many directors take exactly £9,100 salary (zero employer NICs) and extract remaining profits as dividends to minimise both employer and employee NICs while maintaining State Pension qualifying years
• Employment Allowance restriction: A sole director with no other employees cannot claim the £5,000 Employment Allowance. Adding even one part-time employee makes the company eligible.

Multiple Employments: If an employee works for multiple employers, each employer's NIC liability is calculated separately and independently:

• Each employer pays 13.8% on earnings above £9,100 with that employer specifically
• There is no aggregation across employers for employer NICs (unlike employee NICs which can be aggregated for refund purposes)
• Example: An employee earns £15,000 from Employer A and £12,000 from Employer B. Employer A pays (£15,000 - £9,100) × 13.8% = £814. Employer B pays (£12,000 - £9,100) × 13.8% = £400. Both employers pay independently.

Key difference from employee NICs: Employees earning from multiple jobs may end up overpaying employee NICs (because the upper earnings limit of £50,270 is per job, not aggregated), and can claim a refund from HMRC. Employers cannot—each employer pays based solely on what they pay that employee.

When and how do I pay employer National Insurance to HMRC?

Employer NICs are collected through the PAYE system and must be paid to HMRC according to your payroll frequency:

Payment deadlines:

• Monthly payments: By the 22nd of the following month (or 19th if paying by post)
• Weekly payments: Smaller employers may be able to pay weekly, though most use monthly
• Quarterly payments: Only available if your average monthly payment is under £1,500

How to pay: Most employers use Real Time Information (RTI) reporting through payroll software, which automatically calculates NICs and submits Full Payment Submission (FPS) reports to HMRC on or before each payday. You then pay the combined PAYE income tax + employee NICs + employer NICs as a single payment to HMRC.

Example payment breakdown: If you run monthly payroll on 28th of the month, you must submit your FPS by 28th and pay HMRC by 22nd of the following month. Your payment includes:

• PAYE income tax deducted from employees
• Employee NICs deducted from employees
• Employer NICs (your cost, not deducted from employees)
• Student loan repayments
• Apprenticeship Levy (if payroll over £3 million)

Late payment penalties: HMRC charges interest on late payments at the official rate (currently around 7-8%). Repeated late payments can also trigger automatic penalties of 1-4% of the tax due. Set up Direct Debit to avoid missing deadlines.

Class 1A NICs: These are paid separately on an annual basis by 22 July (19 July if paying by post) following the end of the tax year, after you've submitted P11D forms reporting all taxable benefits.

What's the difference between Class 1, Class 1A, Class 1B, and other NIC classes?

The UK has multiple NIC classes, each serving different purposes. As an employer, you'll primarily deal with Class 1 and Class 1A:

Class 1 NICs: The main payroll NICs on cash earnings (salaries, wages, bonuses)

• Class 1 Primary: Employee contributions deducted from their pay (8% then 2%)
• Class 1 Secondary: Employer contributions (13.8% above £9,100)—this is what this calculator focuses on
• Paid monthly through PAYE system with salary

Class 1A NICs: Employer-only NICs on taxable benefits in kind (company cars, private medical insurance, etc.)

• 13.8% on the cash equivalent value of benefits
• Paid annually by 22 July after the tax year ends
• Reported via P11D forms by 6 July
• Cannot be reduced by Employment Allowance

Class 1B NICs: Employer-only NICs on items included in a PAYE Settlement Agreement (PSA)

• 13.8% on the total value of items covered by the PSA
• Used for minor, irregular, or impracticable expenses and benefits
• Paid by 22 October following the tax year
• Voluntary arrangement with HMRC to simplify administration

Class 2 NICs: Flat-rate contributions for self-employed people (£3.50/week for 2026/27). Not paid by employers—only relevant if you're self-employed. See our Self Employed Tax Calculator for details.

Class 3 NICs: Voluntary contributions to fill gaps in your NI record for State Pension purposes. Not employer-related.

Class 4 NICs: Profit-based NICs for self-employed people (6% then 2% on profits). Not paid by employers. Covered in our Self Employed Tax Calculator.

For employers, focus on: Class 1 Secondary (main payroll NICs at 13.8%) and Class 1A (benefits at 13.8%). These are the two that directly impact your employment cost calculations.