What Is National Insurance?
By PayMetric Labs Research Desk
Short answer
National Insurance (NI) is a UK payroll tax that funds state benefits and pensions, charged at 8% on earnings between £12,570 and £50,270, and 2% above that, for employees in 2026/27.
Employee Class 1 National Insurance is deducted through PAYE alongside Income Tax, but it's a separate charge with its own thresholds and rates. You start paying NI once your earnings pass the Primary Threshold (£12,570, aligned with the Personal Allowance), at 8% up to the Upper Earnings Limit (£50,270), then 2% on everything above that.
That 2% drop above £50,270 is a common source of confusion: your NI rate actually falls as you earn more, even though your Income Tax rate rises to 40% at the same threshold. This is why the combined marginal rate calculation (Income Tax plus NI together) matters more than looking at either tax in isolation.
Employers also pay a separate Employer NI contribution on top of your salary, which doesn't come out of your pay but is a real cost to your employer, relevant if you're negotiating a package or comparing the true cost of hiring you.
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This glossary entry is for general information only and does not constitute financial, tax, or legal advice. Rates and thresholds shown reflect current published guidance and may change.