National Insurance is the second-biggest deduction on most UK payslips — and the least understood. Most people know it exists and vaguely know it funds the state pension, and that is about where their knowledge stops. This guide explains National Insurance for the 2026/27 tax year (6 April 2026 to 5 April 2027) in plain English: what it is, what you pay, and how it interacts with income tax.
The club membership analogy: what National Insurance actually is
Think of National Insurance as a club membership fee rather than a tax. Income tax goes into the government’s general pot and pays for everything. National Insurance is earmarked: it funds specific things — mainly the State Pension, plus Jobseeker’s Allowance, Employment and Support Allowance, Maternity Allowance and bereavement benefits.
Just like a club tracks your membership, the government tracks your NI record. You get a National Insurance number at 16, and each year you pay (or are credited with) contributions builds your record. You need 35 qualifying years to get the full new State Pension. So unlike income tax, which simply disappears into the Treasury, NI buys you something specific: your future pension entitlement.
Employee National Insurance rates for 2026/27
If you are employed, you pay Class 1 National Insurance. The rates for 2026/27 are refreshingly simple:
| Annual earnings | NI rate |
|---|---|
| Below £12,570 | 0% |
| £12,570 – £50,270 | 8% |
| Above £50,270 | 2% |
The £12,570 threshold is called the Primary Threshold — below it you pay nothing. The £50,270 ceiling is the Upper Earnings Limit. Notice the quirk: unlike income tax, where the rate goes up as you earn more, the NI rate goes down — from 8% to 2% — once you pass £50,270.
The motorway toll analogy: the 8% to 2% drop
Imagine a toll motorway where the first stretch costs £8, and then — strangely — the rest of the journey costs only £2 no matter how far you drive. That is National Insurance. You pay the full 8% rate on the middle stretch of your earnings (£12,570 to £50,270), and then just 2% on everything beyond.
This is the opposite of income tax, where the expensive stretch comes at the top (40%, then 45%). The practical effect: for earners between £50,270 and £100,000, the combined marginal rate is 42% (40% tax + 2% NI) — noticeably less painful than it first looks.
Worked example 1: £25,000 salary
Priya earns £25,000:
- First £12,570: £0 NI
- Remaining £12,430 at 8%: £994.40
Total NI: £994.40 for the year, about £83 a month. Compare that with her income tax of £2,486 — NI is the smaller deduction at this salary, but far from trivial.
Worked example 2: £35,000 salary
Dan earns £35,000:
- First £12,570: £0 NI
- Remaining £22,430 at 8%: £1,794.40
Total NI: £1,794.40 for the year, about £150 a month. His combined deductions (income tax £4,486 + NI £1,794.40) come to £6,280.40 — which is why his take-home pay is £28,719.60, not £35,000 minus tax alone. Try the figures yourself on our take-home pay calculator.
Worked example 3: £60,000 salary
Aisha earns £60,000:
- First £12,570: £0 NI
- Next £37,700 (£12,570 to £50,270) at 8%: £3,016
- Remaining £9,730 above £50,270 at 2%: £194.60
Total NI: £3,210.60 for the year. Notice how small the top slice is: the £9,730 above the Upper Earnings Limit costs her only £194.60 in NI, while the same slice costs £3,892 in income tax. This is the 8%-to-2% drop in action.
NI vs income tax: the key differences
They look similar on your payslip, but they work differently:
- Different thresholds, same numbers (by coincidence). Both start at £12,570, but NI has no equivalent of the personal allowance taper — earning £110,000 does not reduce your NI thresholds.
- Opposite shapes. Income tax rates rise with earnings (20% → 40% → 45%). NI rates fall (8% → 2%).
- Different timing. Income tax is calculated on your total annual income. NI is calculated per pay period — which is why a big one-off bonus can push a single month’s pay into higher NI even if your annual salary is modest.
- NI stops at State Pension age. Once you reach State Pension age, you stop paying employee National Insurance entirely — but you keep paying income tax. Your payslip literally gets bigger on your birthday.
- No NI on pension income. Pensions are subject to income tax but not NI, another reason retirees’ deductions look different from workers’.
What does your employer pay?
Your employer pays its own National Insurance on top of your salary — 15% on earnings above £5,000 a year in 2026/27. This never appears on your payslip and does not reduce your take-home pay, but it is part of what you cost to employ. Some people add it to their “true” tax burden; strictly speaking, it is your employer’s bill, not yours.
A note on the Autumn Budget
The Chancellor’s Autumn Budget on 28 October 2026 could change NI rates and thresholds — the 8% main rate in particular is always Budget-day speculation. Check back after Budget day for updated figures.
Frequently asked questions
What is National Insurance actually for?
Mainly the State Pension, plus contributory benefits like Jobseeker’s Allowance and Maternity Allowance. Your NI record determines whether you qualify for the full State Pension.
How much NI do I pay on £35,000?
£1,794.40 a year in 2026/27 — 8% on the £22,430 above the £12,570 Primary Threshold, which works out at about £150 a month.
Why does NI drop to 2% for high earners?
That is simply how the system is designed: the Upper Earnings Limit caps the main 8% rate, and earnings above it attract only 2%. It is one reason the UK’s overall tax system is less progressive than the income tax bands alone suggest.
Do I pay National Insurance after State Pension age?
No. Employee NI stops entirely once you reach State Pension age, though income tax continues. Tell your employer so your tax code and payroll are updated.
Is National Insurance the same as income tax?
No. They are separate deductions with separate thresholds and rates, calculated differently (NI is per pay period; income tax is annual), and they fund different things.
