What is National Insurance?
National Insurance contributions, known as NICs or NI, are a UK payroll charge on earnings. Employees pay Class 1 contributions through payroll and employers pay a separate secondary contribution on top of the wage, sometimes called business National Insurance. The payments count towards entitlement to the state pension and certain benefits, and each person has a National Insurance number that tracks their record.
For 2026 to 2027, GOV.UK shows employees in category A paying nothing on weekly earnings up to £242, 8% on earnings from £242.01 to £967, and 2% on anything above £967. On annual figures these correspond to the £12,570 primary threshold and the £50,270 upper earnings limit. The employer rate is 15% for the year that runs from 6 April 2026 to 5 April 2027. GOV.UK gives an example: a category A employee earning £1,000 in a week pays nothing on the first £242, 8% (£58) on the earnings up to £967 and 2% (£0.66) on the rest, £58.66 in total.
The NI category letter, sometimes searched as NI code, tells payroll which rates to use for a person. It is not the same as the tax code. GOV.UK lists A as the standard letter for most employees, B for married women and widows with a reduced rate certificate, C for employees over State Pension age, H for apprentices under 25, J for employees who defer NI because they pay it elsewhere, M for employees under 21, V for veterans in their first civilian job after service, and Z for under 21s who defer NI. Further letters exist for Freeport and Investment Zone special tax sites. Employers use the letter on every payroll run, so a wrong letter means wrong contributions.
A payroll operator should check the letter when hiring, when the employee reaches a birthday that changes it (for example turning 21 or reaching State Pension age) and when an apprenticeship starts or ends. Contributions are reported to HMRC in the Full Payment Submission each pay day and paid over with PAYE. Any category letter change should be recorded from the date it applies.
In practice
A payroll administrator hires a 23-year-old apprentice and sets category letter H because the apprentice is under 25. When the employee turns 25 the letter moves to A, and contributions are calculated under the standard rates from that pay period. Take a category A employee paid £1,000 in a week: payroll works out £58.66 of employee National Insurance using the 2026 to 2027 bands, and separately calculates the employer contribution at 15% on the pay above the employer's secondary threshold. Both amounts appear in the Full Payment Submission sent to HMRC on or before payday. If an employee reaches State Pension age, payroll changes the letter to C, and employee contributions stop while the employer's contribution continues.
Frequently asked questions
What is National Insurance?
It is a UK tax on earnings paid by employees and employers. It builds a person's record for the state pension and some benefits.
What does an NI category letter mean?
It tells payroll which National Insurance rates apply to a person. For example A is the standard letter, M is for employees under 21, H is for apprentices under 25 and C is for employees over State Pension age.
What is an NI code?
People usually mean the National Insurance category letter shown on a payslip. It is separate from the tax code and from the National Insurance number.
What is business National Insurance?
It is the employer's secondary Class 1 contribution, paid on top of an employee's wages. For 2026 to 2027 GOV.UK gives the rate as 15%.
What are the employee National Insurance rates for 2026 to 2027?
For category A, employees pay 8% on weekly earnings between £242.01 and £967 and 2% above £967, according to GOV.UK. Earnings up to £242 a week attract no contribution.