Definition
Mandatory contributions deducted from an employee's earnings through payroll, which count toward their entitlement to state benefits including the State Pension. The amount depends on earnings and the employee's NI category letter.
UK Context
Employees pay Class 1 Primary NICs at 8% on earnings between the Primary Threshold and the Upper Earnings Limit, and 2% on earnings above the UEL. The Primary Threshold for 2025/26 is 12,570 pounds per year. NI contributions build qualifying years for State Pension entitlement.
Best Practices
- Ensure correct NI category letters are applied for each employee based on their circumstances
- Show employee NIC deductions clearly on every payslip
- Direct employees to check their National Insurance record online for gaps in contributions
Frequently Asked Questions
What is the employee NIC rate?
For 2025/26, employees pay 8% on earnings between the Primary Threshold (12,570 pounds per year) and the Upper Earnings Limit (50,270 pounds per year), and 2% on earnings above the UEL.
Do all employees pay the same NIC rate?
No, the rate depends on the employee's NI category letter. Category A is the standard rate. Category H applies to apprentices under 25 and has a higher threshold. Category M applies to employees under 21. Each category has different thresholds and rates.