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. Below this limit employees pay 8% NI; above it the rate drops to just 2%. The alignment with the higher-rate threshold means that moving into the higher-rate band often coincides with the drop in NI rate, slightly offsetting the increase in income tax.
How it works
The Upper Earnings Limit marks the point where the employee Class 1 National Insurance rate drops from 8% to 2%. Unlike income tax, where higher earnings are always taxed at a higher or equal rate, National Insurance actually falls once you cross the UEL — a quirk that surprises many people expecting a steadily rising deduction as they earn more.
Because the UEL is set at the same level as the income tax higher-rate threshold, £50,270, a pay rise that pushes someone into the Higher Rate tax band also drops their marginal NI rate on that extra income from 8% to 2% at the same time. This partly offsets the higher income tax rate, which is why the jump in take-home pay lost to crossing into higher-rate tax is smaller than it might first appear.
The UEL applies per employment, not per person, so someone with two jobs each paying below the UEL individually could pay 8% NI in both jobs even though their combined income exceeds the limit — a mismatch that can sometimes be addressed by applying for deferment on one job's National Insurance.
Example: NI on a £60,000 salary crossing the Upper Earnings Limit
Earnings between the Primary Threshold (£12,570) and the UEL (£50,270) — a band of £37,700 — are charged at 8%: £37,700 × 8% = £3,016.
The remaining £9,730 (from the UEL up to the £60,000 salary) is charged at the lower 2% rate: £9,730 × 2% = £194.60. Total employee Class 1 NI for the year is £3,016 + £194.60 = £3,210.60.
Frequently asked questions
Why does my National Insurance rate go down instead of up as I earn more?
Above the Upper Earnings Limit, the employee NI rate drops from 8% to 2% by design — the higher rate only applies within a specific income band, so very high earners actually pay a lower marginal NI rate on their top slice of income than someone earning around the UEL.
Does the Upper Earnings Limit apply separately to each job I have?
Yes — National Insurance is assessed per employment rather than on your combined income, so each job gets its own thresholds. Your total NI across two jobs can therefore differ noticeably from what a single job paying the same combined salary would deduct.
Is the Upper Earnings Limit the same as the higher-rate income tax threshold?
Yes, the two are aligned at £50,270, which is a deliberate policy choice so that the point where NI drops to 2% coincides with the point where income tax rises to 40%.
Related Terms
Class 1 National Insurance
National Insurance contributions paid by employees and employers on earnings above the Primary Threshold.
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.
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.
Higher Rate
The income tax rate of 40% applied to taxable income above £50,270 up to £125,140 in England, Wales, and Northern Ireland.
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