What Is National Insurance and How Is It Calculated?
National Insurance is the second big deduction on your UK payslip after income tax — but few people understand it. This guide explains what National Insurance is, the 2025/26 rates and thresholds, and how to work out exactly how much you pay.
If you've ever looked at your payslip and wondered what that "NI" deduction is, you're not alone. National Insurance is a tax on earnings that sits right next to income tax, yet it's far less understood. This guide explains what National Insurance is, who pays it, the 2025/26 rates and thresholds, and how to calculate exactly how much comes out of your pay — with worked examples.
To see your National Insurance alongside income tax and pension deductions in one place, try our UK Take-Home Pay Calculator.
What is National Insurance?
National Insurance (NI) is a contribution paid by workers and employers that funds certain state benefits — most importantly the State Pension, but also things like Jobseeker's Allowance, Maternity Allowance and bereavement support. Your NI record, built up over your working life, determines whether you qualify for the full State Pension when you retire.
Unlike income tax, which applies to almost all income including savings and rental income, National Insurance is generally only charged on earnings — money you get from working, whether employed or self-employed.
National Insurance rates and thresholds for 2025/26
For employees (known as Class 1 contributions), the 2025/26 rates work like this:
| Earnings band | Annual threshold | NI rate |
|---|---|---|
| Below the primary threshold | Up to £12,570 | 0% |
| Main rate | £12,570 to £50,270 | 8% |
| Upper rate | Above £50,270 | 2% |
Notice that National Insurance actually drops to 2% above £50,270 — the opposite of income tax, which rises to 40% at that point. This is one reason the tax system feels complicated: the two deductions move in different directions as your salary grows.
Worked example: NI on a £30,000 salary
Let's calculate National Insurance on a £30,000 salary for 2025/26:
- The first £12,570 is below the primary threshold — no NI.
- The remaining £17,430 (from £12,570 to £30,000) is charged at 8% = £1,394.
So on £30,000 you pay roughly £1,394 in National Insurance for the year — about £116 a month. Combine this with income tax and you get your full deductions, which we walk through in how to calculate your UK take-home pay.
Worked example: NI on a £60,000 salary
A £60,000 salary crosses the upper threshold, so NI is charged in two slices:
- Main rate: £12,570 to £50,270 = £37,700 at 8% = £3,016
- Upper rate: £50,270 to £60,000 = £9,730 at 2% = £195
Total National Insurance = £3,211. Because the rate falls to 2% above £50,270, high earners pay proportionally less NI on their top slice of income than a basic-rate worker does.
National Insurance for the self-employed
If you work for yourself, you pay a different class of National Insurance. Class 4 contributions are charged on your profits, at 6% between the lower and upper profit limits and 2% above. The rules changed in recent years, with Class 2 contributions largely reformed. If you're self-employed, our UK Self-Employed Tax Calculator works out both your income tax and NI on your profits.
Do employers pay National Insurance too?
Yes — and this part is invisible on your payslip. Employers pay their own class of National Insurance (Class 1 secondary) on top of what you pay. This employer NI is a significant cost of employing someone, which is why salary sacrifice arrangements — where you swap salary for pension contributions — can save both you and your employer money.
Frequently asked questions
What is National Insurance used for?
National Insurance funds state benefits, chiefly the State Pension. Your contribution record determines your entitlement to the full State Pension and certain other benefits like Maternity Allowance.
How much National Insurance do I pay in 2025/26?
As an employee you pay 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. You pay nothing below £12,570.
Why does National Insurance go down to 2% for high earners?
Above the upper earnings limit of £50,270, the NI rate drops from 8% to 2%. This is simply how the system is designed — it means NI takes a smaller percentage of income at higher salary levels.
Do I pay National Insurance on my pension?
No. National Insurance is only charged on earnings from work. Once you reach State Pension age, you stop paying NI on employment income altogether, and pension income is never subject to NI.
Is National Insurance the same as income tax?
No, they are separate. Income tax applies to most types of income and rises to 40% and 45% at higher levels, while National Insurance applies mainly to earnings and falls to 2% above £50,270.
This article was last reviewed for the 2025/26 tax year. Figures are for guidance only — always verify with HMRC or a qualified accountant.