National Insurance Explained — What It Is, How Much You Pay, and Why
National Insurance (NI) is the second biggest deduction from most UK employees' pay after income tax. Yet many people don't fully understand what it is, how it's calculated, or what they get in return. Here's a clear explanation.
What is National Insurance?
National Insurance is a tax on earnings paid by employees, employers and the self-employed. It funds state benefits including the NHS, the State Pension, statutory sick pay, maternity pay and jobseeker's allowance. Despite the name, it functions as a payroll tax — the connection between what you pay in and what you get out has weakened significantly over decades.
Employee NI rates 2026/27
| Weekly earnings | Annual equivalent | NI rate |
|---|---|---|
| Up to £242/week | Up to £12,570 | 0% |
| £242–£967/week | £12,570–£50,270 | 8% |
| Above £967/week | Above £50,270 | 2% |
NI is calculated weekly or monthly (not annually like income tax), which means the exact amount can vary slightly from annual estimates.
Employer NI 2026/27
From April 2026, employers pay 15% NI on employee earnings above £5,000 per year (reduced from £9,100). This is a significant cost increase for businesses and affects hiring decisions, particularly for part-time and lower-paid roles.
How NI affects your take-home
For a £45,000 salary in 2026/27:
- On earnings £12,570–£45,000 = £32,430 at 8% = £2,594 NI
- No earnings above £50,270, so 2% rate doesn't apply
Compared to income tax of around £6,486, NI takes a smaller but still substantial chunk.
NI and the State Pension
Your NI record matters for retirement. You need 35 qualifying years of NI contributions (or credits) to receive the full new State Pension of £221.20/week in 2026/27. You need at least 10 qualifying years to receive anything.
Gaps in your NI record — from career breaks, self-employment with low earnings, or time abroad — can reduce your State Pension. You can check your NI record at gov.uk and may be able to fill gaps voluntarily.
Reducing your NI bill
Salary sacrifice pension contributions reduce your gross salary for NI purposes — one of the key reasons salary sacrifice is so tax-efficient. Other salary sacrifice benefits (cycle to work, electric car schemes) also save NI.
See your exact NI deduction
Our salary calculator shows your precise NI alongside income tax and take-home pay.
See exactly how much NI you pay
Our salary calculator shows your full NI breakdown alongside income tax and take-home pay.