For the 2025/26 tax year (April 2025 to March 2026), Employer National Insurance is straightforward in principle:
The £5,000 is the Secondary Threshold — the point above which employers start paying NI. Everything below is free. The 15% rate was introduced in April 2025 (up from 13.8%), and the threshold dropped from £9,100 to £5,000.
Why this matters: the higher rate (15% vs 13.8%) plus lower threshold (£5,000 vs £9,100) increased employer NI costs by roughly 18–25% per employee compared to the previous year. If your spreadsheet still uses the old rates, your headcount budget is significantly understated.
Worked examples
Example 1: £35,000 salary (junior role)
Example 2: £55,000 salary (mid-level)
Example 3: £95,000 salary (senior/head of)
There's no upper earnings limit for Employer NI — unlike employee NI, which drops to 2% above the Upper Earnings Limit. Employer NI is a flat 15% on everything above £5,000, no matter how high the salary.
Employment Allowance — the £10,500 deduction
Most small and medium businesses can claim the Employment Allowance, which deducts up to £10,500 from your total Employer NI bill for the year. This isn't per employee — it's a single deduction from your total NI liability.
You qualify if your Employer NI bill was under £100,000 in the previous tax year. Most businesses with fewer than roughly 40–50 employees will qualify.
Here's how it works for a 10-person team:
| Employee | Salary | Employer NI |
|---|---|---|
| Head of Engineering | £85,000 | £12,000 |
| 3× Developers (each) | £65,000 | £27,000 |
| Product Manager | £60,000 | £8,250 |
| 2× Sales Reps (each) | £45,000 | £12,000 |
| Office Manager | £32,000 | £4,050 |
| Marketing Manager | £48,000 | £6,450 |
| Customer Support | £28,000 | £3,450 |
| Gross NI bill | £73,200 |
That's a £10,500 saving — equivalent to almost the full NI cost of your Customer Support hire. If you're not claiming it, you're leaving money on the table.
NI relief categories — under-21 and apprentices
Employers get enhanced relief for two categories:
- Employees under 21 (NI category M): the Secondary Threshold increases to £50,270 instead of £5,000. For most salaries, this means zero Employer NI.
- Apprentices under 25 (NI category H): same — the threshold jumps to £50,270.
For a 20-year-old developer earning £30,000, the Employer NI under normal rules would be £3,750. Under category M, it's £0. That's a significant saving if you're hiring graduates or apprentices.
Don't forget — bonuses and car allowances attract NI too
Employer NI is charged on all earnings above the threshold, not just base salary. That includes bonuses, commission, and cash car allowances. A £5,000 bonus costs an extra £750 in Employer NI.
The salary sacrifice NI saving
If your pension scheme operates on salary sacrifice, the employee's pension contribution is deducted from gross pay before NI is calculated. Both the employee and employer save NI on the pension amount.
For an employee on £55,000 contributing 5% (£2,750) via salary sacrifice, the employer saves 15% × £2,750 = £413. Across 20 employees, that's over £8,000 per year — from a payroll configuration change, not a cost cut.
Common mistakes
- Using the old rate: 13.8% was the rate until April 2025. It's now 15%.
- Using the old threshold: £9,100 was the previous threshold. It's now £5,000. This alone adds £615 of NI per employee.
- Forgetting Employment Allowance: if you qualify, claim it.
- Not pro-rating for starters: a September starter costs 7/12 of annual NI, not 12/12.
- Ignoring NI on bonuses: a 10% bonus on a £60k salary adds £900 of NI.
Stop calculating NI by hand
Headcount Agent calculates Employer NI automatically for every employee — with the correct threshold, Employment Allowance, salary sacrifice savings, and under-21 relief. Just enter the salary and see the result.
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