Class 1 National Insurance changes

There have been several rate changes to National Insurance Contributions (NIC) since April 2022. We have covered these below on a year-by-year basis.  

Class 1 National Insurance for 2025/26

From 6 April 2025, the Employers' National Insurance Contributions will rise by 1.2% to 15%. 

From the same date, the employers’ secondary threshold will reduce from £9,100 to £5,000 per annum, further increasing the NIC payable by employers. This threshold is expected to remain at this level until 6 April 2028 when it will then increase in line with CPI.  

The Employment Allowance will also increase from 6 April 2025 from £5,000 to £10,500 helping to offset some of the increase in employer NIC. Employers will no longer need to have incurred a secondary Class 1 NIC liability of less than £100,000 in the prior tax year in order to claim, thus increasing the number of employers that can claim (although connected party rules will continue to apply).   

The main employee rate and upper rate remain the same at 8% and 2% respectively.

NIC for 2024/25

From 6 April 2024, the main employee rate of National Insurance Contributions was reduced to 8%. The upper rate at 2% and employer rate at 13.8% remain the same.

NIC for 2023/24

From 6 April 2023, the main employee NIC rate was 12% - and from 6 January 2024 it was reduced to 10%. This gives a rate of 11.5% for statutory directors for the year. 

The upper rate at 2% and the employer rate of 13.8% remained the same for the year. 

NIC for 2022/23

The introduction of the 1.25% increase in both employers’ and employees’ NIC on 6 April 2022 was followed by the increase to the employees’ primary threshold, to bring it in line with the income tax personal allowance (£12,570) on 6 July 2022. These were designed by the previous government as a pre-curser to the introduction of the Health and Social Care Levy (HSCL) from April 2023.  
 
The Government from September 2022 heralded a reversal of the rate increase and repeal of the HSCL - the immediate changes took effect from 6 November 2022.  
 
Where NIC was calculated on a weekly/month period basis both employers and employees paid less NIC on all earnings from 6 November onwards as set out in the table below:   
 

Class 1	Primary Threshold	Employee main	Employee upper	Employer
6 April to 5 July 2022	Weekly      £190 Monthly     £823	13.25%	3.25%	15.05%
6 July 2022 to 5 November 2022	Weekly      £242 Monthly     £1,048	13.25%	3.25%	15.05%
5 November 2022 to 6 April 2023	Weekly      £242 Monthly     £1,048	12%	2%	13.8%
Statutory directors (Whole year average)	£11,908 (averaged)	12.73%	2.73%	14.53%
Class 1 A NIC Class 1 B NIC				14.53% 14.53%
Class 4 NIC (Whole year average)	£11,908 (averaged)	9.73%	2.73%

 

NIC for Statutory directors 

Statutory directors (broadly those recorded as directors of a company at Companies House, e.g., NEDs and the Board) have NIC calculated on an ‘annual earnings period’ for both the director’s and the employer’s contributions.  

Class 1A and 1B NIC

Employers also pay Class 1A NIC on any benefits in kind provided, which covers the complete tax year and is remitted by July following the tax year.   
 
For the 2022/23 tax year only a new NIC rate of 14.53% was introduced. This rate should have been used for any Class 1B NICs that apply to PAYE Settlement Agreements.  
 
For 2023/24 the rate that applies is 13.8%.  

For 2025/26 the rate that applies is 15%.

NIC deferment calculations

For those individuals who need to consider whether they may have exceeded the annual maximum NIC threshold (i.e., those with more than one job who can claim ‘deferment’) NIC rates as shown below will need to be used in the calculations as appropriate:  
 
2022/23        12.73% for employees   
 
2023/24        11.5% for employees

What should employers do?

Businesses paying discretionary bonuses might also consider making these now before the increase to employers’ NIC from 6 April 2025 to be more cost-efficient.  

Using salary sacrifice as a mechanism for making pension contributions, referred to as SMART pensions, has never been more advantageous as employers’ NIC increases Other salary sacrifice arrangements such as for electric vehicles also remain beneficial from a tax and NIC perspective.  
 
It has always been appropriate to identify statutory directors in regular payrolls, so checking that recently appointed directors and NEDs are recorded correctly is good practice.  

If you have questions or need advice on your business' NIC position, get in touch with our expert team, who will be happy to help.
 

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