Meeting your obligations towards HM Revenue and Customs (HMRC) forms an important part of your duties as an employer in the UK. This includes payment of Employers’ National Insurance alongside your employees’ National Insurance Contributions (NICs).
The following guide examines the rules relating to employers’ national insurance contributions, from what these are for and who has to pay them, to the applicable rates and how these are paid. It also covers the rules and rates for employees’ national insurance contributions which, as an employer, you’re liable to pay to HMRC on the employee’s behalf.
What is Employers’ National Insurance?
National Insurance is a form of tax on earnings paid by both employers and employees.
For the employee, national insurance contributions are paid directly from their earnings, deducted by the employer from their gross pay to be given to HMRC.
For the employer, their contributions are paid on top of the employee’s earnings and benefits, again to be paid to HMRC, and is a cost borne by the employer in addition to the employee’s gross pay.
Technically, national insurance is a social security contribution rather than a tax but, as a compulsory payment, to all intents and purposes, it is a form of tax.
By law, all employers must pay national insurance contributions on the salaries paid to their employees to help fund the NHS, the state pension and various benefits, including statutory sick pay and maternity pay. Equally, employers must deduct national insurance on the employee’s behalf to enable them to qualify for the state pension and certain benefits, including contribution-based jobseeker’s allowance and employment and support allowance.
Who is liable to pay Employers NICs?
Most employers in the UK are liable to pay Employers NICs on their employees’ earnings, including full-time, part-time, and temporary employees, directors who receive a salary and agency workers if you directly control the work.
Class 1 National Insurance
There are different classes of national insurance, where the class under which payment falls depends on an individual’s employment status.
People who are employed pay class 1 contributions. The payments deducted from an employee’s wages are known as class 1 primary national insurance contributions, whilst those payable by the employer on top of the employee’s wages are known as class 1 secondary national insurance contributions.
Class 1 national insurance also includes subclasses, known as class 1A and class 1B, which must be paid by employers on employee benefits, like health insurance and company cars, as well as lump sums of more than £30,000, such as redundancy payments.
The point at which class 1 contributions become payable will depend on how much the employee earns, although National Insurance deductions are taken only from earnings above the lower earnings limit, which for 2024/2025 is £123 per week or £533 per month.
Employee Primary Contribution Rates 2024
How much employers should deduct from employees’ pay is calculated using the primary contribution rates as follows:
| National Insurance category letter | Earnings at or above lower earnings limit up to and including primary threshold | Earnings above primary threshold up to and including upper earnings limit | Balance of earnings above upper earnings limit |
|---|---|---|---|
| A | 0% | 8% | 2% |
| B | 0% | 1.85% | 2% |
| C | nil | nil | nil |
| D (Investment Zone — deferment) | 0% | 2% | 2% |
| E (Investment Zone — married women and widows reduced rate) | 0% | 1.85% | 2% |
| F (Freeport) | 0% | 8% | 2% |
| H (apprentice under 25) | 0% | 8% | 2% |
| I (Freeport — married women and widows reduced rate) | 0% | 1.85% | 2% |
| J | 0% | 2% | 2% |
| K (Investment Zone — state pensioner) | nil | nil | nil |
| L (Freeport — deferment) | 0% | 2% | 2% |
| M (under 21) | 0% | 8% | 2% |
| N (Investment Zone) | 0% | 8% | 2% |
| S (Freeport — state pensioner) | nil | nil | nil |
| V (veteran) | 0% | 8% | 2% |
| Z (under 21 — deferment) | 0% | 2% | 2% |
From 6 April 2024, class 1 national insurance contributions are currently payable at a rate of 8% on weekly earnings between the relevant primary and upper earnings thresholds. This means national insurance deductions should only be made on employees’ earnings above the lower earnings limit, and anything earned over and above the upper earnings limit amount is charged at a lower rate of 2%.
Employer Secondary Contribution Rates 2024
Employers have to pay towards their employees’ National Insurance as follows:
| National Insurance category letter | Earnings at or above lower earnings limit up to and including secondary threshold | Earnings above secondary threshold up to and including Freeport and Investment Zone upper secondary thresholds | Earnings above Freeport and Investment Zone upper secondary thresholds up to and including upper earnings limit, upper secondary thresholds for under 21s, apprentices and veterans | Balance of earnings above upper earnings limit, upper secondary thresholds for under 21s, apprentices and veterans |
|---|---|---|---|---|
| A | 0% | 13.8% | 13.8% | 13.8% |
| B | 0% | 13.8% | 13.8% | 13.8% |
| C | 0% | 13.8% | 13.8% | 13.8% |
| D (Investment Zone — deferment) | 0% | 0% | 13.8% | 13.8% |
| E (Investment Zone — married women and widows reduced rate) | 0% | 0% | 13.8% | 13.8% |
| F (Freeport) | 0% | 0% | 13.8% | 13.8% |
| H (apprentice under 25) | 0% | 0% | 0% | 13.8% |
| I (Freeport — married women and widows reduced rate) | 0% | 0% | 13.8% | 13.8% |
| J | 0% | 13.8% | 13.8% | 13.8% |
| K (Investment Zone — state pensioner) | 0% | 0% | 13.8% | 13.8% |
| L (Freeport — deferment) | 0% | 0% | 13.8% | 13.8% |
| M (under 21) | 0% | 0% | 0% | 13.8% |
| N (Investment Zone) | 0% | 0% | 13.8% | 13.8% |
| S (Freeport — state pensioner) | 0% | 0% | 13.8% | 13.8% |
| V (veteran) | 0% | 0% | 0% | 13.8% |
| Z (under 21 — deferment) | 0% | 0% | 0% | 13.8% |
How to pay National Insurance
As an employer, you’re responsible for deducting primary national insurance contributions directly from your employees’ pay through PAYE as part of your payroll. This is then paid to HMRC on the employee’s behalf. You’ll also pay secondary contributions to HMRC as part of your PAYE bill. In most cases, your payroll software will calculate how much national insurance to deduct from your employee’s pay, plus how much you’ll need to pay on top.
In relation to class 1A employers’ national insurance contributions payable on employee benefits, these are to be reported at the end of each tax year using form P11D(b).
National Insurance Employment Allowance
The employment allowance scheme is a government scheme that allows eligible employers to reduce their annual national insurance liability by up to the allowance limit of £5,000 per year. If eligible, you’ll pay less employers’ national insurance contributions each time you run your payroll until the £5,000 has been used or the tax year ends, whichever is sooner.
You can claim the employment allowance if you’re a business and your national insurance liabilities were less than £100,000 in the previous tax year, provided you don’t do more than half your work in the public sector, such as local councils and NHS services. You also cannot claim if you’re a company with only one employee who is paid above the class 1 national insurance secondary threshold, and who is also a company director. You can claim employment allowance for the previous four tax years.
If you have more than one employer PAYE reference, the total employers’ national insurance contributions for your combined payrolls must be less than £100,000 in the previous tax year, and you can only claim employment allowance against one of the payrolls.
How you claim the employment allowance depends on whether you use your own payroll software or HMRC’s Basic PAYE tools. To claim through your own in-house software, put ‘yes’ in the ‘employment allowance indicator’ field next time you send an employment payment summary (EPS) to HMRC. If your payroll software doesn’t have an EPS field, you can use Basic PAYE Tools. You’ll need to select your name on the employer menu, go to ‘change employer details’, and then choose ‘yes’ in the ‘employment allowance indicator’ section. You should answer ‘yes’ to the question ‘Do state aid rules apply?’ if you sell goods or services. If not, choose ‘no’ and select ‘state aid rules do not apply’. You should then send your EPS as normal.
Employers’ national insurance FAQs
What are Employers National Insurance Contributions (NICs)?
Employers NICs are a type of social security tax paid by businesses on top of their employees’ salaries. These contributions help fund the UK’s National Health Service (NHS), state pensions, and other social security benefits.
What are the current Employers NICs rates?
Employers NICs rates are subject to change, so it’s always best to refer to the official government resources. However, as of April 2024, there are two main rates: Class 1 NICs: are 13.8% on employee earnings above the Lower Earnings Limit (£123 per week or £533 per month), and Employers Secondary NICs: are 1.5% on employee earnings above the Secondary Earnings Threshold (£9,880 per year).
How do I calculate and pay Employers NICs?
You’ll typically calculate and pay Employers NICs through HMRC’s Pay As You Earn (PAYE) system. PAYE deducts income tax and National Insurance from your employees’ wages before you pay them. HMRC provides resources and tools to help you calculate and report PAYE deductions, including Employers NICs.
Are there any exemptions for Employers NICs?
There are some exemptions for Employers NICs, such as payments to employees under the age of 21 working less than £9,880 per year, Statutory Sick Pay and Statutory Maternity Pay.
What happens if I don’t pay Employers NICs?
Failing to pay Employers NICs on time can result in penalties and interest charges from HMRC.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
