Class 1 National Insurance
National Insurance contributions paid by employees and employers on earnings above the Primary Threshold. Employees pay 8% on earnings between the Primary Threshold (£12,570) and Upper Earnings Limit (£50,270), and 2% above that. Employers also pay a separate employer's Class 1 NI on earnings above their own secondary threshold.
How it works
Unlike income tax, which is calculated cumulatively across the whole tax year, Class 1 National Insurance is normally worked out separately for each pay period, so your NI deduction depends on what you earn in that specific week or month rather than your total earnings for the year to date. This means someone with irregular income, such as an annual bonus paid in one month, can pay more NI overall than someone earning the same total spread evenly across the year.
The 8% rate applies to earnings between the Primary Threshold and the Upper Earnings Limit, and the rate drops to 2% on anything earned above the Upper Earnings Limit — so higher earners actually pay a lower marginal NI rate on their top slice of income even though their overall tax burden is higher. Employers pay a completely separate employer's Class 1 NI on top, calculated using their own secondary threshold, which is not deducted from the employee's pay.
Directors are treated differently and can choose between the standard per-period method and an annual cumulative method for calculating their Class 1 NI, which can smooth out contributions across the year for those with variable pay such as dividends alongside a small salary. Your payslip shows Class 1 NI as a separate deduction from income tax, and both feed into your overall take-home pay calculation.
Example: Class 1 NI on a £40,000 salary
On a salary of £40,000, no NI is due on the first £12,570 up to the Primary Threshold.
The remaining £27,430 falls below the Upper Earnings Limit of £50,270, so it is all taxed at 8%, giving employee Class 1 NI of £2,194.40 for the year.
Frequently asked questions
Is Class 1 National Insurance calculated the same way as income tax?
No. Income tax is cumulative across the tax year, but Class 1 NI is normally calculated separately for each individual pay period based on what you earn in that period alone.
Do employers pay National Insurance too?
Yes. Employers pay a separate employer's Class 1 NI on top of employee contributions, calculated using their own secondary threshold, and this is an additional cost to the employer, not a deduction from your pay.
Why does my National Insurance rate drop above a certain income level?
Because the rate falls from 8% to 2% once earnings pass the Upper Earnings Limit, so your marginal NI rate is actually lower on income above that point than below it.
Related Terms
National Insurance
A system of compulsory contributions paid by employees, employers, and the self-employed that funds state benefits including the State Pension, Statutory Sick Pay, and Maternity Pay.
Class 2 National Insurance
A flat-rate National Insurance contribution historically paid by self-employed people to build entitlement to the State Pension and other contributory benefits.
Class 4 National Insurance
National Insurance paid by self-employed individuals on their taxable profits, calculated as part of their Self Assessment tax return.
Primary Threshold
The level of earnings above which employees start paying Class 1 National Insurance contributions, set at £12,570 per year (£242 per week) for 2026/27.
Upper Earnings Limit
The earnings level above which employees pay a lower rate of Class 1 National Insurance, currently set at £50,270 — aligned with the higher-rate income tax threshold.
NI Number
A unique personal reference number issued to UK residents to track their National Insurance record, in the format two letters, six digits, one letter (e.
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Use our free tool to see how class 1 national insurance affects your tax.