National Insurance guide for contractors – updated for 2026/27

Employers, employees, and the self-employed pay National Insurance Contributions. What NI rates do contractors pay in 2026/27?

NI – the basics

The National Insurance system was originally established in 1911 to protect workers during sickness and unemployment. It was expanded in 1948.

National Insurance Contributions now account for an increasing proportion of total UK Treasury receipts.

In fact, NI is just another tax on income. It is easier, politically, to raise NICs than to increase income tax rates.

Employers, employees and the self-employed all pay different NI rates, which we explore in this guide.

This article has been updated for the 2026/27 tax year.

Different classes of NI

• Class 1 – paid by employers and employees.
• Classs 1A – paid by employers on the value of benefits or expenses paid to employees.
• Class 2 – voluntary contributions paid by the self-employed to ensure no gaps on your NI record.
• Class 3 – voluntary contributions – if there’s a gap in your NI record.
• Class 4 – paid by the self-employed.

Class 1 National Insurance for Employees

Employees pay Class 1 NICs on salaries.

If you’re a contractor, you are an employee of your limited company or an umbrella company.

In some rarer cases, you might be a PAYE employee of an employment agency.

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If you are an umbrella company or agency employee, your employer deducts income tax and NICs at source. These funds are automatically paid to HMRC on your behalf via the payroll process.

If you work via your own limited company, you have more flexibility over your exposure to National Insurance. It all depends on how you draw down funds from your company.

If you pay yourself and any other employees a salary below, or at the current NIC primary threshold (£12,570), you pay no employees’ NI at all.

Importantly, you don’t pay National Insurance Contributions on company dividends.

Class 1 Employees’ NIC rates

As an employee, you pay Class 1 Employees’ NICs on earnings above the current Primary Threshold (£12,570).

The Class 1 Employees’ rates from 6th April 2026 (unchanged from the previous year) are:

• 8% on salary between £12,570 and £50,270.
• 2% on salaries above £50,270

Class 1 National Insurance for Employers

All employers pay Class 1 NICs on employees’ salaries or wages.

If you work via an umbrella (or contract directly with an agency), your employer will deduct employers’ NICs at source from your assignment rate.

If you contract via your own limited company, your company pays employers’ NICs on employee salaries.

Class 1 Employers’ NIC rate for 2026/27

The employers’ NI rate is 15% on salaries above the £5,000 secondary threshold. There is no upper earnings limit.

Employers don’t pay NI on salaries or wages of £5,000 or less per annum.

What about the employment allowance?

The Employment Allowance reduces eligible employers’ NIC liabilities by up to £10,500 per year.

So, your employers’ NIC bill may be reduced (or cut completely) on salaries above the £5,000 secondary threshold.

However, the eligibility rules have been tightened several times in recent years.

Most small companies (including all one-man companies) are ineligible to claim.

What are Class 1A NI contributions?

If your employer provides you with any benefits in kind, such as a company car, it has to pay NICs on the value of these benefits. These are Class 1A contributions.

The company’s NIC liability is payable annually by 19th July following the end of the relevant tax year.

Class 2 and 4 NICs for the self-employed

The self-employed (sole traders and partnerships) pay Class 4 NICs. Sole traders with low profits can make voluntary Class 2 contributions.

IT contractors rarely work on a ‘self-employed’ basis; however, many freelancers do.

Class 4 NICs are:

• 6% on annual profits between £12,570 and £50,270.
• 2% on profits above £50,270 during 2026/27.

Your Class 4 liability is calculated via the self-assessment process.

From April 2024, Class 2 NICs are no longer mandatory. However, individuals with annual profits below the £6,845 small profits threshold can still make weekly payments of £3.65 in 2026/27.

This ensures their entitlement to the State Pension counts for the current tax year.

National Insurance and the State Pension

The State Pension is worth £241.30 per week (2026/27) – up from £230.25 per week (2025/26).

However, the exact amount you will receive upon retirement depends on how many qualifying years of NI contributions you make during your working life.

You need 35 qualifying years to receive the full amount.

You must receive a salary above the Lower Earnings Limit (LEL) for a tax year to qualify towards your pension.

For 2026/27, the LEL is £6,708 – up from £6,500 (2025/26)

Further Information

Visit GOV.UK’s National Insurance section for in-depth guides, including the prevailing Class 1 (employers/employees) NI rates and self-employed NI rates.