Summary
National Insurance (NI) is a mandatory contribution deducted from your UK payslip alongside income tax — it funds the State Pension, NHS, Statutory Sick Pay, Statutory Maternity and Paternity Pay and contributory benefits — for employees in 2026/27, Class 1 National Insurance is charged at 8% on earnings between £12,570 and £50,270 per year, and 2% on earnings above £50,270; it is taken automatically through PAYE and appears as a separate deduction on your payslip. To understand what is National Insurance UK is crucial for all employees.
Unlike income tax, National Insurance only applies to earned income — not to pension income, investment income or rental income — and it stops entirely once you reach State Pension age (currently 66, rising to 67 from April 2026 in a phased increase by date of birth); each year you pay NI (or receive NI credits) counts as a qualifying year toward your State Pension; you need 35 qualifying years for the full new State Pension
Your employer also pays National Insurance on your earnings — at 15% on earnings above £5,000 per year in 2026/27 — but this does not appear on your payslip — it is a cost paid by your employer on top of your gross salary; the employer rate increased from 13.8% to 15% in April 2025, and the Secondary Threshold was reduced from £9,100 to £5,000, significantly increasing the cost to employers of each employee
National Insurance is the second-largest deduction on a typical UK payslip. For Australians and New Zealanders working in the UK — whether on a Youth Mobility Visa, a Skilled Worker Visa or with settled status — understanding NI is essential for knowing your true take-home pay and for understanding how the UK State Pension system works.
What is National Insurance?
National Insurance (NI) is a tax on earnings that was introduced in 1911 to fund social insurance programmes. Unlike income tax (which goes into the general Treasury pot), NI contributions build entitlement to specific state benefits — most importantly the State Pension.
What NI funds:
- State Pension
- National Health Service (NHS)
- Statutory Sick Pay
- Statutory Maternity Pay and Statutory Paternity Pay
- Contributory Jobseeker’s Allowance
- Contributory Employment and Support Allowance
- Maternity Allowance
What NI does not fund: NI contributions go into a specific National Insurance Fund — they are not general taxation, though in practice the government tops up the fund from general revenue when needed.
2026/27 National Insurance rates — employees (Class 1)
Class 1 National Insurance is the type deducted from employee wages through PAYE. It is calculated per pay period (weekly or monthly) rather than annually.
Employee rates (Class 1)
| Earnings | Rate |
|---|---|
| Below £12,570/year (£242/week) — Primary Threshold | 0% — no NI payable |
| £12,570 to £50,270/year (£242 to £967/week) | 8% |
| Above £50,270/year (£967/week) — Upper Earnings Limit | 2% |
Worked example — £40,000 salary:
- Earnings below threshold: £12,570 — no NI
- Earnings between £12,570 and £40,000: £27,430 × 8% = £2,194.40 per year (£182.87/month)
Worked example — £60,000 salary:
- Earnings between £12,570 and £50,270: £37,700 × 8% = £3,016
- Earnings above £50,270: £9,730 × 2% = £194.60
- Total NI: £3,210.60 per year (£267.55/month)
Note: NI applies a lower marginal rate (2%) above the Upper Earnings Limit — the opposite of income tax, which charges a higher rate on higher earnings. This means the combined income tax and NI marginal rate is lower for higher earners than might be expected.
2026/27 National Insurance rates — employers (Class 1)
Your employer pays a separate Class 1 NI contribution on your earnings. This does not affect your take-home pay — it is paid by the employer in addition to your gross salary.
| Rate | |
|---|---|
| Employer NI rate (2026/27) | 15% |
| Secondary Threshold | £5,000/year (£417/month) |
| Employment Allowance | Up to £10,500 reduction for eligible employers |
Key change — April 2025: The employer NI rate increased from 13.8% to 15%, and the Secondary Threshold was reduced from £9,100 to £5,000 per year. Together, these changes significantly increased employer NI costs. A £30,000 employee who previously cost the employer £2,887.20 in NI now costs £3,750 — an increase of approximately £863 per year.
Employment Allowance: Most employers can reduce their NI liability by up to £10,500 per year through the Employment Allowance — available to most businesses but not to companies where the sole employee is also a director.
2026/27 National Insurance rates — self-employed (Class 4)
If you are self-employed in the UK, you pay Class 4 NI on your trading profits:
| Profits | Rate |
|---|---|
| Below £12,570 | 0% |
| £12,570 to £50,270 | 6% |
| Above £50,270 | 2% |
Self-employed workers pay a lower rate than employees (6% vs 8% in the main band) but do not receive employer NI contributions on their behalf.
How NI appears on your payslip
National Insurance appears as a separate line on your UK payslip — usually labelled “NI” or “National Insurance.” It is listed alongside income tax as a deduction from your gross pay.
Your payslip will show:
- NI Number — your unique National Insurance number (format: two letters, six digits, one letter, e.g. AB123456C)
- NI Category Letter — usually A for most employees; different letters apply to specific categories (married women with pre-1977 elections, those over State Pension age, armed forces veterans, etc.)
- NI deducted — the amount withheld for this pay period
Your employer’s NI contribution may also appear on your payslip for information purposes — but it is not deducted from your pay.
Your National Insurance number (NI number)
Your NI number is a unique personal identifier — the UK equivalent of Australia’s Tax File Number or New Zealand’s IRD number. You need it to:
- Work legally in the UK
- Pay NI and income tax through PAYE
- Access certain benefits
- Build qualifying years toward the State Pension
If you are an Australian or New Zealander arriving to work in the UK:
You can apply for an NI number at gov.uk. You will need to prove your identity and your right to work in the UK (your visa or immigration status). Processing typically takes several weeks — you can start work before you receive your number, but give your employer your number as soon as it arrives.
National Insurance and the State Pension
This is the most important long-term aspect of NI for working Australians and New Zealanders in the UK.
Each year you work and pay NI (or receive NI credits) counts as one qualifying year toward the UK State Pension.
- 35 qualifying years = full new State Pension (£241.30/week in 2026/27 — confirmed from the House of Commons Library, April 2026)
- 10 qualifying years = minimum to receive any State Pension
- Fewer than 10 qualifying years = no State Pension entitlement
For Australians and New Zealanders working in the UK:
If you work in the UK for several years on a visa and then return to Australia or New Zealand, you will have built up qualifying NI years. You can still claim the UK State Pension from State Pension age (currently 66, rising to 67 from April 2026 in a phased increase by date of birth) — even if you are living in Australia or New Zealand at the time.
Voluntary NI contributions: If you have gaps in your NI record and want to fill them, you can make voluntary Class 3 NI contributions from Australia or New Zealand. Check gov.uk for current rates and deadlines.
Check your NI record: Log into your gov.uk account to view your NI contribution history, your forecast State Pension amount and any gaps in your record.
National Insurance and salary sacrifice
Salary sacrifice arrangements (also called salary packaging in Australia) reduce your gross salary for NI purposes — saving both employee and employer NI on the sacrificed amount.
Common salary sacrifice arrangements that save NI:
- Pension contributions through salary sacrifice
- Cycle to Work scheme (bicycles and safety equipment)
- Electric vehicle (EV) novated leases through employer
NI savings from salary sacrifice can be significant — on a £5,000 pension salary sacrifice at the 8% NI rate, the employee saves £400/year in NI; the employer saves £750/year in employer NI at the 15% rate.
FAQs (frequently asked questions)
What is National Insurance in the UK?
A mandatory contribution deducted from your payslip alongside income tax — it funds the State Pension, NHS and other state benefits. For employees in 2026/27: 8% on earnings between £12,570 and £50,270; 2% above £50,270.
How much National Insurance do I pay on a £35,000 salary?
£35,000 − £12,570 = £22,430 × 8% = £1,794.40 per year (£149.53/month).
Does National Insurance appear on my payslip?
Yes — as a separate line item alongside income tax, showing the NI deducted for the pay period.
What is an NI number?
Your unique National Insurance number — the UK equivalent of a Tax File Number. You need it to work and pay tax in the UK. Apply at gov.uk after you arrive.
How does National Insurance affect my State Pension?
Each year you pay NI counts as one qualifying year. You need 35 qualifying years for the full new State Pension. You can claim the UK State Pension from State Pension age even if you have returned to Australia or New Zealand.
Do I pay National Insurance after I retire?
No — you stop paying employee NI once you reach State Pension age (66 for those not yet affected by the phased increase; 67 for those born on or after 6 March 1961). Your employer still pays employer NI on your earnings if you continue working.
Is National Insurance the same as income tax?
No — they are separate deductions with different rates, thresholds and purposes. Income tax funds general government spending; NI funds specific contributory benefits. Unlike income tax, NI only applies to earned income (not pensions, investments or rental income).
Related guides
- England travel guide 2026 →
- Scotland travel guide 2026 →
- What is a TFN in Australia? →
- What is an IRD number in New Zealand? →
This guide is for general information only and does not constitute tax or financial advice. NI rates and thresholds are set annually — always verify current rates at gov.uk. Last updated September 2026.
Sources: calculatemysalary.co.uk — National Insurance Explained 2026/27 (reviewed 6 April 2026) | ukcalc.uk — National Insurance explained (June 6, 2026) | aftertaxsalarycalculator.co.uk — National Insurance 2026/27 (July 2026) | payfit.com — National Insurance changes in 2026: a guide for UK employers (June 25, 2026) | grove.hr — UK National Insurance Rates 2026 (March 11, 2026) | moneyguide.org.uk — National Insurance explained (May 30, 2026) | salarycalculator.co.uk — National Insurance 2026/27 (August 2026) | LITRG — National Insurance for employees (litrg.org.uk)
