Employer’s National Insurance (secondary Class 1 NI) is 15% on earnings above the £5,000 secondary threshold for 2026/27. Employment Allowance reduces the bill by up to £10,500 a year for eligible employers. Beyond that, salary sacrifice (especially into pensions) is the most reliable structural saving, alongside specific reliefs for apprentices, veterans, and freeport or investment-zone employment.
This guide covers the 2026/27 rate and threshold, how to calculate the bill, the four main reduction tactics, and the optimal director salary level for limited company owners.
The 2026/27 employer NI rate and threshold
Employer’s National Insurance (secondary Class 1) is charged on earnings paid to employees above a per-employee secondary threshold. The 2026/27 figures:
- Secondary Class 1 NI rate: 15%
- Secondary threshold: £5,000 per year (£96.15 per week, £416.66 per month)
These figures continued from the rate and threshold change introduced from 6 April 2025. Employer NI is in addition to gross salary — it is a cost on top of the wage you pay.
How to calculate employer NI
The calculation is simple: subtract the secondary threshold from each employee’s annual earnings, then multiply by 15%.
Worked example. An employee earns £35,000 a year:
- Earnings above threshold: £35,000 − £5,000 = £30,000
- Employer NI: £30,000 × 15% = £4,500
For an employee earning £25,000:
- Earnings above threshold: £25,000 − £5,000 = £20,000
- Employer NI: £20,000 × 15% = £3,000
For an employee earning the secondary threshold or less, the employer NI bill is zero. Most payroll software calculates this per pay period and reports it via Real Time Information.
Employment Allowance: the £10,500 reduction
Employment Allowance is a tax-year reduction in your secondary Class 1 NI bill. For 2026/27 the allowance is £10,500, up from previous years and with the £100,000 NI liability cap that previously restricted eligibility now removed entirely.
To claim, you must be an eligible employer. Most employers with at least one employee earning above the secondary threshold can claim. The main exception is single-director companies where the director is the only employee liable for secondary NI — they cannot claim. If a second person earns above the threshold (a co-director, an employee), eligibility is restored for the whole tax year.
Other rules:
- Only one company in a connected group can claim the allowance.
- Public bodies and most employers of personal carers cannot claim.
- Employment Allowance counts as de minimis state aid under UK subsidy control rules, with a general limit of €300,000 over a rolling three-year period.
You claim by ticking the relevant box on your Employer Payment Summary at the start of the tax year (or any time during it). The allowance is then offset against your secondary NI bill until it is exhausted. You can backdate a claim by up to four previous tax years.
For a fuller walkthrough of eligibility and how to claim, see our Employment Allowance UK guide.
Salary sacrifice
Salary sacrifice is the most reliable structural way to reduce employer NI beyond the allowance. The employee agrees to give up part of their gross salary in exchange for a non-cash benefit. The sacrificed amount is excluded from earnings, so neither employee nor employer NI is due on it.
The most efficient sacrifice is into a workplace pension. The employer pays the sacrificed amount directly into the pension scheme as an employer contribution. Saving on employer NI:
- £100 sacrificed = £15 employer NI saving
- £10,000 sacrificed = £1,500 employer NI saving
Many employers share the saving with the employee by uplifting the pension contribution by all or part of the saved NI.
Other salary sacrifice schemes:
- Cycle to Work (£500–£3,000 typical bike value)
- Electric vehicles (under the company-car benefit-in-kind rules — favourable for fully electric)
- Workplace nursery (subject to specific rules)
- Childcare vouchers (closed scheme; only available for employees who joined before October 2018)
Salary sacrifice cannot reduce salary below National Minimum Wage.
Optimal director salary 2026/27
For a limited company director who is also a shareholder, the question is what to pay yourself as salary. The trade-offs:
- Salary up to the £5,000 secondary threshold attracts no employer NI.
- Salary up to the £12,570 personal allowance attracts no income tax.
- Salary up to the £12,570 primary threshold attracts no employee NI.
- Pay above the £5,000 secondary threshold attracts 15% employer NI.
The two most common director salary levels:
- £5,000. Below the secondary threshold, so no employer NI. Below the personal allowance, so no income tax. But it does not maintain a qualifying year for State Pension because it falls below the Lower Earnings Limit.
- Around £12,570. Pays personal-allowance equivalent. Attracts employer NI on the slice above £5,000 (£12,570 − £5,000 = £7,570 × 15% = £1,135.50). For most single-director companies this beats £5,000 because the additional £7,570 of salary is fully tax-deductible against Corporation Tax at 19% or 25%, saving more than the NI cost.
If you employ a co-director or have at least one other employee earning above the threshold, Employment Allowance becomes available and can absorb the £1,135.50 cost entirely. That tilts the calculation strongly toward the personal-allowance salary level.
You can model the trade-off in our employer NI calculator.
Other reductions
Three smaller reliefs that help specific employers:
- Under-21s and apprentices under 25. Employer NI is 0% on earnings up to the upper secondary threshold (£50,270) for employees under 21 or apprentices under 25.
- Veterans. Employer NI is 0% on the first 12 months of civilian employment after leaving regular UK armed forces service, up to the upper secondary threshold.
- Freeports and investment zones. Where eligible, employer NI is 0% on earnings up to a specific zonal threshold for the first three years of employment.
These reliefs are claimed through payroll software using HMRC NI category letters.
Key takeaways
- Employer NI is 15% on earnings above £5,000 for 2026/27
- Employment Allowance reduces the bill by up to £10,500
- The £100,000 cap on Employment Allowance has been removed
- Single-director Ltd companies cannot claim Employment Allowance
- Salary sacrifice into pensions saves 15% on the sacrificed amount
- Veteran and apprentice/under-21 reliefs cut the rate to 0% in qualifying cases
Frequently asked questions
What is employer NI for 2026/27? Employer secondary Class 1 NI is 15% on earnings above £5,000 per employee per year. The rate and threshold continued from changes introduced in April 2025.
How much is Employment Allowance in 2026/27? £10,500. The £100,000 NI liability cap that previously restricted eligibility has been removed, so all eligible employers can claim regardless of total NI bill size.
Why can’t single-director companies claim Employment Allowance? HMRC excludes companies where the director is the only employee paid above the secondary threshold. If a second person (another director or employee) earns above the threshold, the company becomes eligible for the whole tax year.
How does salary sacrifice reduce employer NI? Salary sacrificed into a workplace pension is no longer earnings, so no employer NI is due on it. £100 sacrificed saves £15 in employer NI at the 15% rate.
What’s the optimal director salary in 2026/27? For most single-director companies, around £12,570 is more efficient than £5,000 because the additional salary is tax-deductible at the Corporation Tax rate, which usually exceeds the 15% employer NI cost. Where Employment Allowance is available, the personal-allowance salary level is even more strongly preferred.
Useful resources
GOV.UK — Rates and thresholds for employers 2026 to 2027 https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027
HMRC — Employment Allowance guidance https://www.gov.uk/claim-employment-allowance
HMRC — Salary sacrifice guidance https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye