Money Matters

Employers’ National Insurance contributions: What you need to know

Understand how employers’ National Insurance contributions work, including current rates, thresholds, and how to manage them through payroll.

If you’re managing payroll for a small or medium business, National Insurance can feel like another one of those boxes you just have to tick.

But when the rules change, like they have in the 2025/26 tax year, that box can turn into a bit of a challenge.

In this article, we’ll help you understand exactly what employers’ National Insurance contributions are, how they work, what’s changed, and how to stay on top of your responsibilities without the stress.

With everything you need in one place, whether you’re handling payroll yourself or managing the process through a team or provider, we’ve got you covered.

Here’s what we cover:

What are employers’ National Insurance contributions?

Employers’ National Insurance contributions (NICs) are payments you make to HMRC for every employee who earns over a certain amount.

They’re separate from the deductions you take from your employees’ pay. This is a cost to your business, not something your employees cover.

These contributions go towards funding state benefits such as the NHS, state pension, maternity allowance, and unemployment benefits. In other words, they’re a big part of how the UK’s welfare system operates.

Here’s how it works:

• Employees pay their own Class 1 NICs (which you deduct through payroll).
• You, the employer, also pay Class 1 secondary NICs—an extra charge based on what your employee earns above a certain threshold.

How employers’ National Insurance contributions work

As an employer, you’ll pay NICs for most employees over the age of 16 who earn above the weekly, monthly, or annual thresholds. You calculate these through your payroll system each time you run payroll.

Let’s take a look at this in more detail:

• Class 1 secondary contributions are the ones you’re responsible for.
• These are charged as a percentage of an employee’s earnings above the secondary threshold.
• They’re paid directly to HMRC through PAYE, along with Income Tax and employee NICs.

You don’t usually pay employers’ NICs for:

• Employees under 21 (up to a certain earnings limit)
• Apprentices under 25 (this is the same as employees under 21, employers’ NICs are due on earnings over the upper earnings limit).

Current rates and thresholds for 2025/26

Here’s what you need to know for the current tax year:

• Employer’s NIC rate: 15% (up from 13.8%)
• Secondary threshold: £5,000 per year (down from £9,100)
• That’s £96 a week, or £417 a month.

So if you pay an employee £1,000 per week:

• You’ll pay NICs on £904 (that’s £1,000 minus £96)
• 15% of £904 = £135.60 per week

These changes mean you’ll start paying NICs sooner and at a higher rate than in previous years, which could impact your payroll budget, especially if you’ve got a growing team.

Check HMRC’s rates and thresholds for 2025-2026.

How to manage employers’ National Insurance contributions

Staying on top of your employers’ NICs doesn’t need to be complicated. Here are four steps to keep things running smoothly:

1. Use payroll software to automate calculations

Many modern payroll software tools do the heavy lifting for you. They’ll apply the latest thresholds, calculate contributions accurately, and keep you compliant.

If you’re not already using software, it’s worth the investment.

2. Keep an eye on thresholds and rule changes

Tax years change every April, and with changes like the 2025 employers’ NIC increase, it’s essential to stay up to date.

It might be a good idea to subscribe to HMRC updates or set a reminder to check the rates each year.

3. Take advantage of the Employment Allowance

If your employers’ NICs total less than £100,000 a year, you could claim up to £10,500 off your bill via the Employment Allowance.

Not all businesses are eligible, but many are, and it’s an area that’s often overlooked. You can find more details on eligibility criteria on HMRC’s website.

4. Get support when you need it

Whether it’s from your accountant, payroll software provider, or HMRC’s helpline, don’t be afraid to ask for help. Employers NICs can be fiddly, but you’re not expected to know everything.

Employers’ NICs and your payroll process

NICs are part of your regular PAYE responsibilities. When you pay your staff, you’ll need to:

• Work out employee deductions and employer contributions
• Report payroll figures to HMRC using Real-Time Information (RTI)
• Send a Full Payment Submission (FPS) every time you pay someone
• Pay the total (including income tax, employee NICs, and your employers’ NICs) to HMRC

The deadline to pay HMRC is usually the 22nd of the following tax month (or the 19th if you pay by post). Late payments can result in penalties, so it’s worth setting reminders or using payroll software that flags them for you.

Common mistakes to avoid

Of course, mistakes will always happen, but with a few proactive steps, you can dodge the ones that trip up a lot of small and medium businesses:

1. Misclassifying workers

Are they truly an employee? Or are they self-employed or a contractor? Getting this wrong can mean paying unnecessary NICs—or underpaying, which risks penalties.

2. Forgetting the Employment Allowance

This is a big one. Many businesses either don’t realise they’re eligible or forget to tick the right box in their payroll software.

3. Missing rule changes

Changes to rates and thresholds can sneak up on you, especially if you don’t handle payroll every day. That’s why a quick yearly check-in is essential—or, better yet, software that updates automatically.

4. Manual calculations

Trying to do things manually leaves you wide open to errors. We don’t just use automation to save time, but also to make sure things are right.

What HR teams are saying

Payroll experts consistently flag National Insurance as a top area of confusion for businesses, especially when rules change mid-tax year or when onboarding new employees.

In a recent episode of The HR Uprising podcast, HR consultant Lucinda Carney noted:

“With legislation shifting all the time, it’s not surprising many HR professionals feel unsure about what’s compliant and what’s not—especially in SMEs where there’s no dedicated payroll team.”

Even experienced HR managers can find employers’ NICs tricky, so don’t wait until HMRC chases you to make sure your setup is right.

Final thoughts

Getting employers’ National Insurance contributions right is a lot more than just a tick-box exercise. When done right, it helps to protect your business, keep you compliant, and avoids any unexpected costs.

With the threshold dropping and rates rising in 2025, now’s the time to double-check your setup, automate where you can, and take advantage of reliefs like the Employment Allowance.

Using trusted payroll software can help simplify the process, keep you up to date, and give you the peace of mind that everything’s running as it should.

After all, the more confident you are with NICs, the more time and energy you can spend growing your business.