Victoria Purton FCCA explains Employers’ National Insurance Contributions and potential ways to reduce your UK tax bill.<\/h2>\n
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You think you have your head around taxes and then there’s National Insurance, yet another piece of the puzzle!<\/p>\n
This is the life of a business owner in the UK where the tax system is one of a multitude of important rules, discovering more regulations, whilst also trying to make maximum use of available allowances, reliefs, and breaks. It can be quite the head scratcher and one of those essentials is Employers’ National Insurance Contributions (NICs)<\/span><\/a><\/span>.<\/p>\n If you employ staff then NICs is non-negotiable, and a core part of payroll<\/strong> given it’s also a major contributor to government revenue, accounting for roughly one-sixth of all tax collected<\/strong>.<\/p>\n This post will guide you through how NICs works, your responsibilities as an employer, and a few ways you may be able to reduce your tax bill. Be sure to read on to find out more:\u00a0\u00a0<\/p>\n <\/p>\n National Insurance (NI) forms part of the UK tax system<\/span> and it was first introduced in 1911, and then expanded in 1948, to fund state benefits including:<\/p>\n People’s eligibility for some benefits such as the state pension can depend\u00a0on the NICs\u00a0they’ve made during their working life.<\/span> If you have employees over the age of 16 and you’re paying them above a certain amount, you owe NICs on their earnings<\/span>. That\u2019s in addition to what your employees pay themselves which is based on a portion of their salaries.\u00a0<\/p>\n The contributions are taken through the Pay As You Earn (PAYE) system<\/span> meaning the deductions happen before payday through your payroll when it’s processed. NICs is in effect a tax on employing people and it forms a significant amount of what HMRC collects in tax every year. \u00a0<\/p>\n Example:<\/span> Say you open a cafe and hire 2 baristas, you’d then become aware through your payroll that you’re liable for Employer NICs every month at \u00a3270. If you then multiply that by 12 you can then see how the cost of employing people adds up over time. \u00a0<\/p>\n <\/p>\n You’ll pay C<\/span>lass 1 Secondary National Insurance Contributions (NICs)<\/strong> on your employees\u2019 earnings above <\/span>the Secondary Threshold (ST)<\/strong>. That’s currently \u00a3417 per month in the 2025\/26 tax year<\/span><\/a><\/span>. Once their gross pay exceeds that threshold, you have to pay a percentage of those earnings.<\/p>\n The calculation is actually one of the simpler parts of the UK tax system:<\/p>\n Employer NICs = <\/strong>(Your employee\u2019s gross pay \u2212 the Secondary Threshold) \u00d7 Applicable rate<\/strong><\/p>\n<\/blockquote>\n Most employers pay a flat 15%<\/span> above the threshold. But not all employees are treated equally. <\/span><\/p>\n Each of your employees will have a letter code, and that’s their NI category. Their category is a reflection of their circumstances and the common ones are covered in the table below.<\/p>\n Specialist categories also exist with reduced rates for eligible workers in Freeports, Investment Zones, and maritime industries. The most common NI categories include:<\/p>\nWhat is Employers’ National Insurance Contributions?\u00a0<\/h2>\n
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<\/a><\/span><\/span><\/p>\nHow much do employers pay in NI?\u00a0<\/h2>\n
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Common NI categories<\/h2>\n
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