A Complete Guide to Employers’ National Insurance Contributions (NICs)

When you run a business and pay employees (including directors of a company), you have a legal obligation to pay certain National Insurance contributions (NICs) as an employer. In the UK this is primarily Class 1 Secondary NICs (often described simply as “employer’s NICs”) on earnings above a threshold. These contributions are separate from the NICs deducted from the employee’s pay (Class 1 Primary NICs).

From an accounting perspective, employer’s NICs increase the cost of employment — and for a company they are deductible for corporation tax purposes as part of staff costs.

Key thresholds & rates for 2025-26

Here are the relevant headline numbers for the tax year 6 April 2025 to 5 April 2026:

• The Secondary Threshold (i.e., the level of earnings above which employer’s NIC becomes payable) is £5,000 per annum.
• The employer’s NIC rate (Class 1 Secondary) is 15% on earnings above that threshold.
• The Personal Allowance (for employee tax purposes) remains £12,570.

So in simple terms: from 6 April 2025, an employer will start paying 15% on employee (or director) pay above £5,000 in that tax year (ignoring for the moment other reliefs).

• The threshold dropped from £9,100 to £5,000 from 6 April 2025.
• The rate increased (from 13.8% to 15%).
• To offset some of the cost burden for smaller employers, the Employment Allowance was increased to £10,500 for 2025-26, and the previous £100,000 employer NIC bill cap was removed.

These changes mean employer’s NICs are now a more prominent cost — particularly for businesses that might previously have incurred little or no employer NIC because staff salaries were below old thresholds.

If you are the sole director of your own limited company and you are the only employee on the payroll, there are some important points to note:

• Even if you pay yourself a modest salary, if it exceeds the £5,000 threshold you will incur employer’s NICs at 15%.
• You cannot claim Employment Allowance in the typical case of a company with only one employee who is also the director. Guidance confirms that a sole-director only payroll is excluded from EA.

This means that the employer’s NIC cost really becomes “real” in these cases, and you must factor it into your remuneration planning.

Example calculation: Salary of £12,570 in 2025-26

Let’s say a company pays the sole director a salary of £12,570 (which aligns with the personal allowance) in 2025-26. What’s the employer NIC cost, and how does that interact with corporation tax? Salary: £12,570.  Employer’s NIC chargeable earnings: £12,570 minus the threshold £5,000 = £7,570. Employer’s NIC at 15% on £7,570 = £1,135.50. Because the salary is a deductible expense for the limited company, the company reduces its taxable profit by £12,570 (plus the employer NIC cost) which reduces corporation tax. So if corporation tax is say 25%, the tax saving is approx £12,570 × 25% = £3,142.50 (plus the NIC cost is deductible as staff cost too). In effect the net cost to the company of paying that salary is the salary + employer NIC minus the corporation tax relief so net cost ≈ £12,570 + £1,135.50 – £3,142.50 = £10,563 (approx)

From the director / owner’s perspective, the salary is free of income tax (since the personal allowance is £12,570) and employee NICs may be nil (depending on other income) so this can remain tax-efficient.

This illustrates how employer NICs must be factored in, but because the salary is deductible for corporation tax, it is “offset” to some extent. It does not mean employer NICs are irrelevant — they are a real cash cost — but they reduce taxable profit so the net overall impact is softened via corporation tax relief.

What is it? Employment Allowance allows eligible employers to reduce their employer’s NIC liability by up to the allowance (for 2025-26, up to £10,500) in the tax year.

Eligibility key points:

• From 6 April 2025 the maximum allowance is £10,500.
• The previous cap on having employer NICs liability < £100k was removed.
• However, companies where only one employee is paid (and that employee is the director) are not eligible.

What this means for sole-director only payrolls:

If your limited company employs only yourself as director and no other employees, you cannot claim Employment Allowance against the employer’s NIC you pay on your salary. That means the full employer’s NIC cost (above threshold) must be borne, with no relief via the EA. It’s an important planning point.

Running your payroll properly includes not just calculating salaries and NIC, but submitting to HM Revenue & Customs and paying the amounts on time. A few pointers:

You can pay your PAYE/NIC bill by direct debit, which is generally the easiest and most reliable way. HMRC accepts direct debit payments for employer PAYE bills.

Payment frequency: most employers pay monthly, but if your average monthly PAYE/NIC bill is small (under approximately £1,500 per month) you may qualify to pay quarterly instead.

Deadlines:

• If paying monthly: your payment must reach HMRC by the 22nd of the next tax month after the tax month ended.
• If paying quarterly: you pay by the 22nd after the end of the quarter.

Setting up direct debit ensures your payment is processed automatically (once you’re registered) and reduces risk of missing deadlines — missing a payment or paying late can incur interest and penalties.

Here are the key take-aways and action points:

• As a limited company director who pays yourself a salary, remember that your company is liable for employer’s NICs on salary above the threshold (£5,000) at 15% from 2025-26 and because Employment Allowance cannot be claimed in the typical sole-director only situation, you must budget for the full employer’s NIC cost. However, the salary and employer’s NIC are deductible expenses for the company, which reduces corporation tax — so the net “after tax” cost is lower.
• If you pay yourself a salary around £12,570, you can (a) remain within the personal allowance for income tax, (b) avoid or minimise employee NICs, (c) preserve a qualifying year for state pension (if applicable) and (d) plan remuneration efficiently — but factor in the employer’s NIC cost.
• Make sure you submit your payroll (FPS/EPS) and pay the employer’s NIC/PAYE to HMRC by the correct payment date. Setting up direct debit and deciding monthly or quarterly payment frequency early is wise.
• Keep your payroll records accurate, ensure you’ve registered as an employer and use payroll software to handle the calculations.

Employer’s National Insurance has become more significant as a cost item from April 2025. For owner managed limited companies, especially those where the director is the sole employee, it’s vital to incorporate employer’s NIC into your remuneration plan — not just from the salary you pay yourself, but the cost your company bears, how it impacts profit, corporation tax, and overall cash-flow.

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