National Insurance is the deduction on your payslip that most people never question, sitting quietly next to income tax and taking a chunk of every pay packet. It works differently from income tax, funds different things, and matters more than people realise — because it is what builds your State Pension. Here is what you actually pay in 2025/26, and why it is worth understanding rather than ignoring.
- Employees pay 8% National Insurance on earnings between £12,570 and £50,270, then 2% above.
- It is separate from income tax, with its own thresholds and rates.
- The self-employed pay 6% then 2% Class 4 NI on profits.
- National Insurance is what builds your State Pension record — not just another tax.
How National Insurance works for employees
If you are employed, you pay Class 1 National Insurance, deducted automatically before you are paid. For 2025/26:
- You pay nothing on the first £12,570 a year (the primary threshold).
- You pay 8% on earnings between £12,570 and £50,270.
- You pay 2% on everything above £50,270.
So unlike income tax — where the rate rises to 40% in the higher band — National Insurance actually falls to 2% once you pass £50,270. That is why high earners' marginal rates are a little lower than you might expect at the top. See your own deduction on the National Insurance calculator or the full picture on the take-home pay tool.
A quick example
Someone earning £35,000 pays NI only on the slice above £12,570:
Earnings above the threshold
£35,000 − £12,570 = £22,430.
Apply 8%
£22,430 × 0.08 = about £1,794 a year.
Monthly
roughly £150 of National Insurance.
All of it at 8%, because £35,000 is below the £50,270 upper limit where the rate drops to 2%.
What the self-employed pay
If you work for yourself, you pay Class 4 National Insurance through Self Assessment on your profits:
- 6% on profits between £12,570 and £50,270.
- 2% on profits above £50,270.
Class 2 National Insurance, the old flat weekly charge, is now voluntary for most — but paying it (or having enough profit) still builds your State Pension record, which matters (see below). The self-employed rates are slightly lower than the employee 8%, reflecting that they get fewer contributory benefits.
Why National Insurance is not just another tax
Here is the part that makes NI different from income tax: it is the mechanism that builds your State Pension. Each year you pay enough National Insurance (or receive credits) counts as a "qualifying year." You generally need about 35 qualifying years for the full new State Pension, and at least 10 to get anything at all.
Gaps in your record can cost you a full State Pension Years spent not working, with low earnings, or abroad can leave gaps that reduce your State Pension. The good news is you often get NI credits automatically — for example while claiming Child Benefit or certain other benefits — and you can sometimes pay voluntary contributions to fill gaps. Check your record and forecast with the State Pension tool; fixing a gap is occasionally one of the best-value things you can do.
Income tax versus National Insurance
People often lump the two together, but they are genuinely separate systems:
| Income tax | National Insurance | |
|---|---|---|
| Tax-free threshold | £12,570 personal allowance | £12,570 primary threshold |
| Rates | 20% / 40% / 45% (rises) | 8% then 2% (falls) |
| Applies to | Most income, including savings | Mainly earnings from work |
| Builds State Pension? | No | Yes |
They only line up neatly at £50,270, where the higher-rate tax band and the lower NI rate both begin.
Frequently asked questions
As an employee in 2025/26, 8% on earnings between £12,570 and £50,270, then 2% above. The self-employed pay 6% then 2% Class 4 NI on profits.
Unlike income tax, the NI rate falls from 8% to 2% above £50,270. So the very top of your earnings is charged less NI, not more.
No. They are separate systems with different thresholds and rates, and National Insurance specifically builds your State Pension entitlement, which income tax does not.
Yes — Class 4 NI at 6% then 2% on profits through Self Assessment. Class 2 is now voluntary for most, but contributing still protects your State Pension record.
Each qualifying year of NI counts toward the State Pension. You need about 35 years for the full amount, so gaps can reduce it — though credits and voluntary contributions can help fill them.
Figures are 2025/26 estimates for the UK. Treat take-home figures as a guide and check your own National Insurance record on gov.uk.