National Insurance contributions
Employees
For 2025/26 the rates of Class 1 employee NICs are 8% and 2%. The employer rate is 15%.
The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee's earnings and is currently set at £5,000 a year from 6 April 2025. The government announced that this will be maintained at this level until April 2031.
The Employment Allowance allows eligible businesses with employer NICs bills to deduct £10,500 from their employer NICs bill.
The self-employed
For 2025/26 the rates of Class 4 self-employed NICs are 6% and 2%. These rates remain the same for 2026/27.
For Class 2 NICs from 6 April 2025:
- Self-employed people with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance Credit, without paying Class 2 NICs.
- Those with profits under £6,845 who pay Class 2 NICs voluntarily to get access to contributory benefits, including the State Pension, will continue to be able to do so.
Changes for 2026/27
The government will increase the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) from 2026/27. For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs for 2026/27.
The LEL will be £6,708 per annum (£129 per week) and the SPT will be £7,105 per annum. The main Class 2 rate will be £3.65 per week and the Class 3 rate will be £18.40 per week.
Employer NICs relief for veterans
The government will extend the employer NICs relief for employers hiring qualifying veterans to April 2028.
This means that businesses continue to pay no employer NICs up to annual earnings of the Veterans Upper Secondary Threshold of £50,270 for the first year of a veteran's employment in a civilian role.
National Living Wage and National Minimum Wage
The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2026. The rates which will apply are as follows:
| |
NLW |
18-20 |
16-17 |
Apprentices |
| From 1 April 2026 |
£12.71 |
£10.85 |
£8.00 |
£8.00 |
The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.
Taxable benefits for company cars
The rates of tax for company cars are amended for 2026/27:
- the charge for zero emission cars rises from 3% to 4%
- the charge for other cars with emissions below 75g/km increases by 1%
- the maximum benefit of 37% remains.
The government has confirmed increases to the benefit in kind rates for company cars for tax years up to and including 2029/30.
The government announced that it is introducing a temporary easement to mitigate the increasing benefit in kind tax liabilities of plug-in hybrid electric vehicle (PHEV) company cars due to new emission standards. The easement will apply retrospectively from 1 January 2025 to 5 April 2028. Transitional arrangements will apply to certain PHEVs until 5 April 2031.
Car fuel benefit charge
The government will increase the car fuel benefit charge from 6 April 2026.
Company vans
The government will increase the Van Benefit Charge and the Van Fuel Benefit Charges from 6 April 2026.
Mandating the reporting of benefits in kind via payroll software
The government confirms that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to income tax and Class 1A NICs.
Tackling tax non-compliance in the umbrella company market
To tackle the significant levels of tax avoidance and fraud in the umbrella company market, the government will make recruitment agencies responsible for accounting for PAYE and Class 1 NICs on payments made to workers that are supplied via umbrella companies.
Legislation will be introduced to make employment agencies or end clients joint and severally liable for any amount required to be accounted for under the PAYE provisions, where an umbrella company forms part of a labour supply chain. Further legislation will be introduced which will impose an equivalent joint and several liability for NICs purposes.
This will allow HMRC to pursue an agency in the first instance for any payroll taxes that a non-compliant umbrella company fails to remit to HMRC on their behalf. The end client will be liable if contracting directly with an umbrella company.
Where there is no agency, the responsibility will fall to the end client business.
This will take effect from 6 April 2026. The measure will protect workers from large, unexpected tax bills caused by unscrupulous behaviour from non-compliant umbrella companies.
Ending contrived car ownership schemes
The government is amending the benefit in kind rules so that vehicles provided through employee car ownership arrangements will be deemed to be taxable benefits when made available on restricted terms.
Under these arrangements an employer or a third party sells a car to an employee, often via a loan with no repayment terms and negligible interest, then buys it back after a short period.
These arrangements mean those benefiting don't pay company car tax, which other employees pay, and so this measure will seek to level the playing field.
Arrangements existing prior to commencement will continue without a change in treatment until the earlier of the arrangement being varied, renewed, or 6 April 2032.
There will also be an exemption from the benefit in kind rules for vehicles provided on arm's length terms within the motor industry.
The government has confirmed its intention to delay the operative date to 6 April 2030.
Changes to salary sacrifice for pensions from April 2029
The government is changing how salary sacrifice for pension contributions works.
Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension.
From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).
Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.
Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.
Employees, as well as employers, will pay NICs on the amount above £2,000 for employee contributions through salary sacrifice.
Employees who choose to salary sacrifice to receive Tax Free Childcare or Child Benefit can keep doing so.
Expanding workplace benefits relief
This measure will introduce new legislative exemptions for the reimbursement of eye tests, flu vaccines and home working equipment.
Under current law, the exemption only applies where the employer provides the benefit directly. This change will ensure that reimbursements are treated in the same way.
This will have effect on or after 6 April 2026.
Removal of tax relief on non-reimbursed homeworking expenses
This measure will remove the tax relief available to employees who have incurred additional household costs if they are required to work from home. These costs include increased household utility costs and business telephone calls.
It will only apply to those employees who have not had these costs reimbursed by their employer.
This will not impact the existing ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting Income Tax and NICs.
This will take effect from 6 April 2026.