Employer National Insurance for small businesses: what it costs in 2026/27

Employer National Insurance is what your company pays on top of an employee's wages: 15% of everything above £96 a week, or £5,000 a year, with no upper limit. It never comes out of the employee's pay. For many small payrolls the Employment Allowance cancels it out altogether, up to £10,500 a year, though the rules shut out companies where a single director is the only person on the payroll. All three of those figures changed on 6 April 2025, so a budget or an article written before then has the wrong numbers in it.

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What changed in April 2025

Three figures moved on the same day. The employer rate went from 13.8% to 15%, the secondary threshold dropped from £9,100 a year to £5,000, and the maximum Employment Allowance doubled from £5,000 to £10,500.

The bar on employers whose Class 1 National Insurance bill topped £100,000 the year before went at the same time, so the size of last year's bill no longer decides whether you can claim.

It was the threshold, not the rate, that changed who pays. Take someone on £10,000 a year, which is a few shifts a week. In 2024/25 only £900 of that sat above the threshold, so your company's National Insurance on them came to about £124 for the year. In 2026/27, £5,000 of it sits above the threshold and the bill is £750. The payrolls that felt this were the ones built on part-time hours, not the ones with five people on £40,000.

Our own research caught what owners expected before any of it landed. In March 2025, the month before the change took effect, two-thirds (66%) of small business leaders told us they expected the higher rate to cost them each over £10,000, 59% expected to raise prices, and 22% said they would cut headcount. Those were forecasts rather than outcomes, and the businesses most exposed to them are the labour-intensive ones – care, cleaning, hospitality, and retail – where wages are the largest line in the accounts.

One date for the diary. The Budget is on 28 October 2026, and employer National Insurance is among the most exposed taxes a small company pays – the rate, the threshold, and the allowance all moved together last time. If you are reading this after that date, check the rate and the threshold again before you budget on anything here.

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What one extra employee actually costs you

The number a hiring decision turns on is not the salary. It is the salary, plus employer National Insurance, plus the pension you have to pay into – and on a mid-range salary that adds about 15%.

Take someone on £30,000. Employer National Insurance is 15% of the £25,000 above the threshold, so £3,750 for the year. If they are aged between 22 and State Pension age and earn at least £10,000, you also have to enrol them in a workplace pension and pay in at least 3% of their earnings between £6,240 and £50,270 a year, which comes to £713. Your employee puts in 5% on top of your 3%, and that part costs your company nothing. So a £30,000 salary is £34,463 of cost.

Here is the same sum at three salary levels, assuming your company gets no Employment Allowance:

Above the threshold the National Insurance rises in a straight line, so every extra £1,000 of salary costs you £150 more. Two things the table leaves out: plenty of pension schemes pay more than the legal minimum, and none of this covers equipment, training, or cover when someone is off. What does bring it down, often to nothing, is the Employment Allowance.

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The Employment Allowance takes up to £10,500 off the bill

The Employment Allowance is not a payment into your account. It is a credit of up to £10,500 a year against your company's employer National Insurance, and it works by reducing what you owe HMRC each month until the £10,500 runs out.

Divide £10,500 by 15% and you get £70,000. That is how much pay above the secondary threshold the allowance covers before your company pays anything at all. Two people on £30,000 generate £7,500 of employer National Insurance, and the allowance swallows it whole. A third salary takes the bill to £11,250 and leaves £750 to pay. Above that you pay the full 15% on everything over each employee's threshold.

For a company with one or two people on the payroll, then, employer National Insurance often nets to zero – if the company is allowed to claim.

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Whether your company can claim it

Most small companies can, but one exclusion catches a lot of them: if your company has only one director, that director must not be the only employee liable for secondary Class 1 National Insurance.

That is not the same rule as the one you will read on most pages, which is that you cannot claim if your only employee is a director. It is about who is paid above the threshold, not about how many people are on the payroll. A company with four employees is still shut out if the director is the only one paid above £5,000 a year. The test works the other way too: as soon as a second employee or a second director is paid above the threshold, your company is eligible for the whole tax year, even if that stops being true later on. Two directors each paid above £5,000 qualify.

The other conditions are easier to clear:

• Your company has to do less than half its work in the public sector, such as for local councils and NHS services. Charities and employers of care or support workers can claim whatever their mix.
• Last year's bill no longer matters, since the £100,000 limit went in April 2025.
• You cannot include someone whose earnings fall under the off-payroll working rules, or someone you employ for personal, household, or domestic work, such as a nanny or a gardener.
• If your company is one of a group of connected companies, only one in the group can claim, and only against one payroll.

You claim by putting 'Yes' in the Employment Allowance indicator field on your next Employment Payment Summary, or through HMRC's Basic PAYE Tools if you do not use payroll software. It is the Employment Payment Summary, not the Full Payment Submission, which is a common mix-up. And you have to claim every tax year, because nothing rolls over.

Claim as early in the year as you can, since the allowance starts reducing your bill from the point you claim rather than from April. If nobody has claimed for your company before, you can also go back: HMRC takes claims for the previous four tax years, as far back as 2021/22, as long as the company was eligible at the time and you can show it.

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If you are the only director, the sums work differently

Two things change when the only person on the payroll is you. Your company still owes employer National Insurance on your own salary, because being a director does not exempt it. And under the rule above, there is no Employment Allowance to set against it.

A director's National Insurance is also worked out differently: from their earnings across the whole tax year, rather than from what they are paid in each pay period. Payroll software does this one of two ways. The standard annual earnings period method works from the running total for the year, which suits a director who takes money out irregularly, and it can produce a sudden jump in the pay run where the year's earnings cross a threshold. The alternative method spreads the charge evenly, which suits a regular monthly salary. Both land in the same place by 5 April; what differs is when the cash leaves.

On a £12,570 salary – the primary threshold, where your own National Insurance starts – £7,570 sits above the secondary threshold, so your company owes £1,135.50 for the year. What salary makes sense depends on how you take money out of the company overall, which is a conversation for your accountant rather than an article.

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What else brings the bill down

There is no small-business exemption from employer National Insurance. The Employment Allowance is the relief, and after that two things reduce what a given payroll costs you.

The first is that some employees carry a zero rate. If you employ someone under 21, an apprentice under 25, or a qualifying veteran in their first year of civilian employment, your company pays nothing on their earnings up to £967 a week, which is £50,270 a year, and 15% only above that. It runs off the category letter on your payroll, so check the letters are right rather than assuming the software has worked it out.

The second is salary sacrifice. An employee gives up part of their cash pay in return for a non-cash benefit, most often a larger pension contribution. Employer National Insurance is charged on cash earnings, so less cash pay means a smaller bill. How much it saves depends on the benefit and how the arrangement is written, and the sacrifice cannot take anyone below the National Minimum Wage. Price it with your accountant first, because the admin is much the same whether one person takes it up or 20.

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What you pay on benefits and expenses

Your company can face three kinds of employer National Insurance, and for 2026/27 all three are charged at 15%. Secondary Class 1 is the one on wages. Class 1A is charged on the taxable value of most benefits you give employees, such as a company car or private medical cover, and it is reported and paid once a year after the tax year ends. Class 1B applies if you agree a PAYE Settlement Agreement with HMRC, where you settle the tax and the National Insurance on minor or irregular expenses in a single annual payment instead of putting them on each employee's record.

The practical point is that the rate is the same either way, so turning pay into a benefit is not in itself a way round the cost.

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When you pay it, and what happens if you are late

Employer National Insurance is not paid on its own. It goes to HMRC inside your monthly PAYE and National Insurance payment, due by the 22nd of the month after the tax month it covers, or by the 19th if you pay by post. If you usually pay HMRC less than £1,500 a month, you can arrange to pay quarterly instead (GOV.UK).

If a payment is late, HMRC will usually tell you. Interest runs daily at the standard rate, and you may be charged a penalty as well, depending on how many times you have been late in the tax year. The penalties for late tax payments set out which.

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When the bill lands before the money does

Payroll is the least movable thing a company pays. Wages go out on payday, the National Insurance and PAYE that go with them are due on the 22nd, and your customers pay when they pay. In a month where a VAT return or a Corporation Tax payment falls in the same few weeks, payroll is where the pressure shows up first. That makes it a cash flow problem rather than a tax problem, and it is usually a seasonal business or one on long customer payment terms that feels it, rather than a struggling one. Our research, published in April 2026, found 28% of small business owners had two months or less of cash in reserve; our free Cash Flow Resilience Benchmark will show you where your company sits.

If the money is coming and the date is the problem, HMRC's Time to Pay is the first thing to ask about: it spreads the bill into instalments, and it costs interest rather than fees. Where that is not available, or where the gap is the wages themselves rather than the tax on them, an iwoca Flexi-Loan is a business loan with flexible repayment options. If payday comes before a big customer pays you, it can cover wages so your team is paid on time, and because there is no fee for repaying early, you can clear it the week the invoice is settled. We lend to UK limited companies.

Flexi-Loan in action: VCare24

Victoria Simpson's social care business pays 200 staff every month, while the local authorities it invoices take 30 to 60 days to settle. She draws around £200,000 to cover payroll and repays it within a week, as those payments come in. Read Victoria's story.

One honest limit. Borrowing suits a gap in timing, not a cost your company cannot carry. Employer National Insurance comes round every month, so if the shortfall looks likely to repeat, the arithmetic further up this page and an hour with your accountant will do more for you than a loan will.

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Employer National Insurance FAQs

Can you claim back employer's National Insurance?

No, not the way you reclaim VAT. It is a cost of employing someone, not a tax you collect for HMRC. You can only reduce it: claim the Employment Allowance if your company qualifies, check whether anyone on your payroll carries a zero rate, and claim any of the past four tax years you missed.

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Is employer's National Insurance tax deductible?

Yes. Secondary Class 1, Class 1A, and Class 1B contributions are all deductible when your company works out its taxable profits, so they reduce the Corporation Tax bill (HMRC). No other class of National Insurance is deductible.

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At what age do employers stop paying National Insurance?

There is no age at which your company stops. When an employee reaches State Pension age they stop paying their own National Insurance and move to category letter C, but your company still pays 15% on their earnings above £5,000 a year.

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Do you pay employer's National Insurance on part-time staff?

Yes, on anything a part-time employee earns above £96 a week. There is no exemption for part-time work. The threshold is per employee rather than per company, though, so the same wage bill spread across more people costs less: two salaries of £15,000 attract £3,000, against £3,750 on one salary of £30,000.

Check your own figures with an accountant. This is general information about employer National Insurance rather than tax advice. An accountant can confirm what your company owes, whether it can claim the Employment Allowance, and what salary makes sense for you as a director.

Every rate and threshold here was checked against GOV.UK on 14 October 2026, for the tax year running from 6 April 2026 to 5 April 2027. The Budget on 28 October 2026 could change any of them.