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 national insurance.
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.
Class 1 national insurance
There are different classes of national insurance, where the class under which payment falls (from 1 to 4) all 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.
Employee NI rates 2023-2024
How much employers should deduct from employees’ pay from 6 April 2023 to 5 April 2024 is calculated as follows:
|Category letter||£123 to £242 (£533 to £1,048 a month)||£242.01 to £967 (£1,048.01 to £4,189 a month)||Over £967 a week (£4,189 a month)|
Class 1 NI rates for deductions from employee pay are as follows:
|—||2023 to 2024||From 6 November 2022 to 5 April 2023||From 6 April 2022 to 5 November 2022||2021 to 2022||2020 to 2021|
|Between Primary Threshold and Upper Earnings Limit||12%||12%||13.25%||12%||12%|
|Above Upper Earnings Limit||2%||2%||3.25%||2%||2%|
|Married women’s reduced rate between primary threshold and upper earnings limit||5.85%||5.85%||7.1%||5.85%||5.85%|
|Rate for employees deferring National Insurance||2%||2%||3.25%||2%||2%|
For employees, class 1 national insurance contributions are currently payable at a rate of 12% 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%.
Weekly thresholds for Class 1 National Insurance 2023-2024
- Lower weekly earnings limit of £123: this is where employees don’t pay national insurance but get the benefits of paying NI
- Primary weekly threshold of £242 per week: this is where employees start paying national insurance
- Secondary weekly threshold of £175: this is where employers start paying national insurance
- Upper weekly earnings limit of £967: this is where all employees pay a lower rate of national insurance above this point
- Upper weekly secondary threshold of £967: this is where employers of employees aged under 21 pay zero up to this point
- Apprentice weekly upper secondary threshold of £967: this is where employers of certain apprentices aged under 25 pay zero up to this point.
- Freeports upper secondary threshold of £967: employers of qualifying employees working in a freeport site pay zero rate up to this point.
- Veterans’ upper secondary threshold of £967: employers of qualifying employees pay zero rate up to this point.
Monthly NI thresholds 2023-2024
- Lower monthly earnings limit of £533: this is where employees don’t pay national insurance but get the benefits of paying
- Primary monthly threshold of £1,048 per month: this is where employees start paying national insurance
- Secondary monthly threshold of £758: this is where employers start paying national insurance
- Upper monthly earnings limit of £4,189: this is where all employees pay a lower rate of national insurance above this point
- Upper monthly secondary threshold of £4,189: this is where employers of employees aged under 21 pay zero up to this point
- Apprentice monthly upper secondary threshold of £4,189: this is where employers of certain apprentices aged under 25 pay zero up to this point.
- Freeports upper secondary threshold of £2,083: employers of qualifying employees working in a freeport site pay zero rate up to this point.
- Veterans’ upper secondary threshold of £4,189: employers of qualifying employees pay zero rate up to this point.
Employer national insurance rates 2023-2024
Employers have to pay towards their employees’ National Insurance as follows:
|2023 to 2024||From 6 November 2022 to 5 April 2023||From 6 April 2022 to 5 November 2022|
|Rate above the Secondary Threshold||13.8%||13.8%||15.05%|
|Rate below Upper Secondary Threshold||0%||0%||0%|
|Rate below Apprentice Upper Secondary Threshold||0%||0%||0%|
|Class 1A rate on expenses and benefits||13.8%||14.53%||15.05%|
Employers pay class 1 contributions of 13.8% on all earnings above the secondary threshold for employees whose pay is above the relevant threshold, which for 2023-2024 is above £123 per week.
However, there are special provisions for employees aged under 21 and apprentices aged under 25, where no national insurance is payable up to specific upper secondary thresholds: for 2023-2024 this threshold is £967 per week or £4,189 per month.
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.
This means that, as with existing national insurance contributions, the additional rate for 2022-2023 will continue to be collected through your PAYE payroll system. However, where employees are liable to pay the increased contribution, HMRC is asking employers to include the following message on payslips: ‘1.25% uplift in NICs, funds NHS, health & social care’. This is to help employees to understand what this extra amount is helping to fund.
From 2023, when the health and social care levy becomes payable, you’ll need to report the levy as a new item through your payroll. This means that you’ll need to show this on your employees’ payslips as a separate 1.25% levy for those liable to pay it.
In relation to class 1A employers’ national insurance contributions payable on employee benefits, these will continue to be reported at the end of each tax year using form P11D(b).
What is the national insurance employment allowance scheme?
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
How much is employers' NI?
For the tax tear 2023-2024, employers NI is set at 13.8% of the employee's relevant earnings.
What is employer and employee national insurance?
Employee national insurance is a tax on their earnings, deducted by the employer at source to pay directly to HMRC. Employers national insurance is an additional cost, payable by the employer at a rate of 13.8% of the employee's qualifying earnings.
Why do I pay employer national insurance?
All employers must pay employers' national insurance contributions on the salaries paid to their employees to help fund the NHS, the state pension and various benefits, for example, statutory sick pay and maternity pay.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal or financial advice, nor is it a complete or authoritative statement of the law or tax rules and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert professional advice should be sought.