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How much National Insurance do employers pay?
At the start of the year, the rate of National Insurance in the UK fell from 12% to 10% with a further cut to 8% announced in the Spring Budget. Although this only tells part of the story of how to calculate National Insurance Contributions (NICs) for employers and employees. These contributions are necessary to receive a State Pension and qualify for certain benefits. In this post, you’ll find an in-depth breakdown of National Insurance and the requirements for employers.
What is National Insurance?
National Insurance is a tax that is automatically deducted from the wages of most workers, as is the case with Income Tax. It is the responsibility of employers to make sure that any NICs are paid. However, much of NICs are made up of Class 1 National Insurance Contributions which come out of employee wages. The rate partly depends on the amount an employee earns, although it is also influenced by their category letter.
- 8% on income of £242 to £967 a week (£1,048 to £4,189 a month)
- 2% on income over £967 a week (£4,189 a month)
Those excluded from paying National Insurance include those who are below the minimum age threshold(16) and those below the minimum weekly earnings threshold.
Employers National Insurance contributions
Each month employers are required to pay National Insurance to HMRC. As mentioned above, the exact amount of NICs to be paid will depend on the type of NI class and salary of the individual. A full breakdown of how much employers should pay towards their employees’ NICs can be found on the Gov.uk website. Note that this data is relevant for the period of April 6th 2024 to April 5th 2025, after which there may be a changes to the rates of National Insurance. Professional employment law consultants for employers will be able to help you prepare for any changes to PAYE payroll and manage staff effectively.
Other ways that National Insurance is collected
Most employees make NICs through the PAYE system (class 1 A/B elements) which is then transferred by their employer to the relevant tax authorities. Other forms of NICs can include:
- Class 3 NICs – employees can choose to supplement their payments with voluntary contributions. These are designed to shore up any gaps an employee has, such as due to maternity or paternity leave. There will be set costs associated with Class 3 contributions that may also change year-on-year.
- Class 4 NICs – this is predominantly for self-employed individuals and paid through the self-assessment tax return. Just as with Class 1 contributions, the rate depends on individual factors. Class 2 contributions may be required at a flat rate for those that earn under a certain amount.
Expert employment law advice for employers
National Insurance is a complex example of employee tax that employers must ensure reaches HMRC. It can be especially difficult to tally up the correct amount of total NICs for a large team. At Employment Law Services (ELS) Ltd, we understand that money can often be a point of contention during employer-employee relations. Our employment law consultants help make sure nothing gets missed when it comes to payroll and tax contributions. Contact us today to get the legal support your business needs.