What is Class 1 National Insurance?
Class 1 National Insurance contributions are payroll contributions linked mainly to employment. The employee contribution is called primary Class 1 NICs. The employer contribution is called secondary Class 1 NICs. Payroll software normally calculates both by pay period and reports them to HM Revenue and Customs.
Class 1 is different from the contribution rules that can apply to self-employed people, voluntary contributions, benefits in kind or termination payments. The correct treatment depends on employment status, earnings, age, category letter and the type of payment.
HMRC publishes the current figures in its 2026 to 2027 employer rates and thresholds. The tax year runs from 6 April 2026 to 5 April 2027. A payroll calculation should use the thresholds for the actual pay interval, such as weekly or monthly, rather than simply dividing an annual estimate without applying payroll rules.
What are the employee Class 1 rates for 2026 to 2027?
For a standard category A employee, no employee Class 1 contribution is normally due below the primary threshold. The employee rate is 8% on earnings above the primary threshold and up to the upper earnings limit. Earnings above the upper earnings limit are charged at 2%.
| Band | Monthly threshold | Annual equivalent | Employee rate |
|---|---|---|---|
| Up to primary threshold | £1,048 | £12,570 | 0% |
| Primary threshold to upper earnings limit | £1,048 to £4,189 | £12,570 to £50,270 | 8% |
| Above upper earnings limit | Above £4,189 | Above £50,270 | 2% |
The weekly primary threshold is £242 and the weekly upper earnings limit is £967. Check the official contribution-rate tables because reduced-rate and special category letters can change the employee rate.
What does the employer pay?
For a standard category A employee, the employer normally pays secondary Class 1 NICs at 15% on earnings above the secondary threshold. For 2026 to 2027, the standard secondary threshold is £96 a week, £417 a month or £5,000 a year.
Some employees have special upper secondary thresholds or 0% employer bands. Examples can include qualifying employees under 21, apprentices under 25, certain veterans, and eligible employees in Freeport or Investment Zone arrangements. The conditions and category letter must be checked rather than inferred from age alone.
Eligible employers may be able to reduce their overall employer NIC liability through Employment Allowance, but that does not change the gross per-employee calculation shown on the payroll record. The HMRC annual rates page lists the main thresholds and allowance. Employers should use supported payroll software and retain evidence for any special category or relief.
What does a monthly Class 1 worked example show?
Assume a category A employee earns £5,000 in one monthly pay period during 2026 to 2027.
Employee contribution
- £4,189 − £1,048 = £3,141 charged at 8%, producing £251.28.
- £5,000 − £4,189 = £811 charged at 2%, producing £16.22.
- Total employee Class 1 NICs = £267.50.
Employer contribution
- £5,000 − £417 = £4,583 above the monthly secondary threshold.
- £4,583 × 15% = £687.45 employer Class 1 NICs before any employer-level allowance.
HMRC’s National Insurance calculation guidance and test service should be used to verify payroll software. Rounding and cumulative payroll treatment must follow the official payroll method rather than a casual annual estimate.
Why do National Insurance category letters matter?
The category letter tells payroll which rates and thresholds apply. Category A is the common standard category, but it is not correct for every employee. Different letters can apply to married women or widows with a valid reduced-rate election, employees over State Pension age, apprentices, younger employees, veterans and specific workplace zones.
A category change can affect employee contributions, employer contributions or both. It may also change part-way through employment when age, apprenticeship status or another condition changes. Employers should not choose a category based only on what produces the lowest contribution.
The GOV.UK category-letter tables set out the current rates. Keep documentation that supports the category, such as proof of age or a valid certificate. Employees who believe the wrong category appears on a payslip should raise it with payroll promptly and keep copies of payslips, employment records and HMRC correspondence.
What does Class 1 National Insurance affect?
Employee Class 1 contributions and credited earnings can contribute to entitlement to certain contributory benefits and the State Pension record, although entitlement depends on wider rules and a single deduction does not guarantee a particular benefit. Earnings between the lower earnings limit and primary threshold can protect a contribution record even where the employee pays no NICs.
For 2026 to 2027, the lower earnings limit is £129 a week, £559 a month or £6,708 a year. That threshold is different from the primary threshold at which employee payments start. This distinction is why a zero employee deduction does not always mean the pay period has no National Insurance significance.
Employees can check their National Insurance record through GOV.UK. Employers should reconcile payroll submissions and correct errors through the appropriate Real Time Information process. Use the dated HMRC thresholds for calculations and seek payroll or tax advice for directors, multiple employments, irregular pay or cross-border cases.
Frequently asked questions
What is the main employee Class 1 rate in 2026 to 2027?
For standard category A employees it is 8% between the primary threshold and upper earnings limit, then 2% above the upper limit.
What is the employer Class 1 rate?
The standard category A employer rate is 15% above the secondary threshold, subject to special categories and employer-level reliefs.
Do employees pay Class 1 below £12,570 a year?
The annual primary threshold is £12,570, but payroll uses pay-period thresholds. Earnings below the payment threshold may still count toward the NI record.
Is National Insurance calculated annually?
Employees are normally calculated by earnings period, while directors can use annual or alternative director methods under payroll rules.
Why is the category letter on my payslip important?
It determines the contribution rates and thresholds that payroll applies to employee and employer contributions.
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Author: FinanceHub UK Editorial Team. Read our editorial policy.
Editorial status: Source checked and selected for indexing. This is an editorial check, not personalised professional advice or regulatory approval.
Sources checked: 3 August 2026. Next scheduled review: 10 July 2027.