How much National Insurance do I pay as an employer?

This guide focuses on how much National Insurance employers must pay on behalf of your employees. Our guide provides more information on National Insurance individuals pay. 

How to calculate your employees’ National Insurance  

All employees have a National Insurance category letter which you should use when submitting payslips and processing your payroll. This helps you to calculate how much you must contribute for each employee. Most employees fall into category A and can locate the category on their payslip. However, there are additional categories depending on employees' individual situation, including:  

• Category B 
  Married working women and widows entitled to pay reduced National Insurance. 
• Category C
  Employees over the current State Pension age. 
• Category H 
  Apprentices under the age of 25. 
• Category J 
  Employers allowed to defer NICs because they are paying it through another job e.g. self-employed income. 
• Category M 
  Employees under the age of 21. 
• Category Z 
  Employees under the age of 21 who can defer NICs because they are paying it through another job. 

Your National Insurance duties as an employer

As an employer, you must deduct employees’ NI contributions (called Primary Class 1 contributions) from their earnings for them. You must subsequently pay this to HM Revenue & Customs (HMRC). 

In addition, employers must pay employers NI (known as Secondary Class 1 contributions) on their employees’ earnings. 

Employers pay primary and secondary contributions to HMRC along with the monthly tax payments each month. You must keep a record of the contributions deducted from each employee and file year end returns for each of them. 

Payroll software will provide you with a number of different reports for you to show this information. Form P32 is the employer payment record and summarises the amounts you have to pay to HMRC each month, including tax (PAYE), and NIC. 

Even if an employee is not paying NI, it is still important to send information to HMRC. This ensures the employees NI record is updated with credits. Without this stamp the employee may not be eligible for a full state pension. 

Employers have to provide employees with a P60 showing the National Insurance Contributions payable by them each year. 

Class 1A contributions 

Employers must also pay Class 1A contributions on most taxable benefits and expenses. You must include details on Form P11D(b) and submit them by 6th July following the end of the tax year. 

Class 1A contributions are payable to HMRC by 22nd July following the end of the tax year. You’ll need to pay contributions by 19th July if you're paying by post. 

Class 1B contributions 

If your employees have a PAYE Settlement Agreement (PSA), you must pay Class 1B contributions. These contributions are different from Class 1 or Class 1A contributions. You must calculate contributions on items included within any PSAs. 

Class 1B contributions are payable to HMRC by 22nd October following the end of the tax year. You’ll need to pay contributions by 19th July if you’re paying by post. 

What is the National Insurance threshold? 

There are six thresholds for paying Class 1 NICs relevant to employers and employees. Employers pay NICs on earnings above the secondary threshold with the exception of employees under 21 or apprentices under 25.

Class 1 NIC thresholds	Monthly	Weekly
Lower Earnings Limit	£533	£123
Primary Threshold	£1,048	£242
Secondary Threshold	£758	£175
Upper Earnings Limit	£4,189	£967
Upper Secondary Threshold	£4,189	£967
Apprentice Upper Secondary Threshold	£4,189	£967

How much NI does an employer pay? 

How much an employer pays in Class 1 NICs depends on their employees’ salary and their NI category letter: 

Income (monthly)	Class 1 (secondary rate
Above £758	13.8%

All employees under the age of 21 and apprentices under the age of 25 are exempt from employer Class 1 NICs, unless they earn £4,189.01 a month or higher. The employee will pay employee class 1 NICs, so there may still be an amount to pay to HMRC. This is a benefit to the employer only. 

Employment allowance 

Employers can use the employment allowance to lower their National Insurance payments by up to £5,000 per year. This reduction is available exclusively to small businesses with total NIC bills of less than £100,000. 

The allowance is given as a credit against contributions payable and can be claimed on the Employer Payment Summary (EPS). If you're preparing your own payroll you'll need to mark in the employment allowance indicator field when sending an EPS. If there is no appropriate field in your software you can use HMRC's PAYE tools. 

NIC relief in UK Freeport tax sites 

Freeports, or Green Freeports in Scotland, are special areas in the UK with tax incentives. Eligible employers within a designated freeport site can apply a zero rate of employers class 1 NIC to the earnings of new employees up to £25,000 for 36 months. There are restrictions in place so speak to your payroll adviser if you need to. 

Need help with National Insurance?

If you are employing staff for the first time, we can work with you alongside our partners to help you negotiate the employment law and ensure you are doing everything by the book. 

If you still require clarification on your National Insurance situation from a qualified and trustworthy professional, we will be happy to help with your bookkeeping or payroll. We can go through your employees’ salaries and benefits income to work out the appropriate NICs for you. 

For a free initial consultation, call our friendly and experienced team today on 01322 553597 or use our online enquiry form. 

Last updated: 21st August 2024