Employee and employer National Insurance
The thresholds and how this affects an optimal salary
National Insurance contributions (NIC) have two parts: Employee NIC (deducted from your salary) and Employer NIC (paid by the company in addition to your salary). Both are triggered at different thresholds.
2026/27 thresholds
- Employee NIC: 8% on earnings between £12,570 and £50,270 per year (£1,048 to £4,189 per month). 2% above £50,270.
- Employer NIC: 15% on earnings above £5,000 per year (£417 per month). No upper limit.
Why the optimal salary is £6,708 or £12,570
A salary of £6,708 minimises the NIC that the company pays and means you will pay no NIC, whilst ensuring that you build up NIC qualifying years towards your state pension. At £12,570 with the Employment Allowance available, Employer NIC is offset by the allowance and no Employee NIC applies at this level. Above these levels, NIC costs start to make salary less efficient than dividends for extracting additional income.
💡 Good to know: Employer NIC is a deductible business expense for Corporation Tax. It reduces your company's taxable profit. The combined NIC cost of employing someone is approximately 15% above the secondary threshold on top of the gross salary.
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