Classes of National Insurance: UK Rates & Thresholds Guide (2026/27)

The Social Security Contributions and Benefits Act 1992 (SSCBA 1992) establishes the framework for National Insurance Contributions (NICs). Legislation divides NICs into several distinct classes, primarily separating employed earners, self-employed earners, and employers.  Practitioners must correctly classify the nature of the income to determine the applicable NIC class.

“National Insurance Contributions are divided into classes: Class 1 payable by employers (secondary class 1 contributions) and employees (primary class 1 contributions) on earnings from employment… Class 4 payable by the self-employed and based on a percentage of profits…

Class 1: Employed Earners (SSCBA 1992, s 6)

Section 6 of the SSCBA 1992 governs Class 1 NICs, which apply to earnings from employment.  The system splits Class 1 into two components: the primary contribution paid by the employee, and the secondary contribution paid by the employer.

When advising on Class 1 NICs, practitioners must correctly identify “earnings”. In The Commissioners for H M Revenue & Customs v Forde and McHugh Limited, the Supreme Court established that “earnings” refers specifically to remuneration derived from employment.  The Court ruled that employer transfers to unapproved retirement benefit schemes with contingent interests do not constitute earnings at the point of transfer because the earner does not yet receive them; rather, the earnings arise upon payment out of the scheme.

• Primary Class 1 (Employee): Following legislative cuts in April 2024, the main rate for primary Class 1 NICs remains at 8% for the 2026/27 tax year.
• Secondary Class 1 (Employer): From 6 April 2025, the government increased the secondary Class 1 rate to 15% and substantially reduced the Secondary Threshold to £5,000 per year.

Class 1A and Class 1B: Employer-Only Contributions

Employers solely bear the liability for Class 1A and Class 1B contributions.  Crucially, these classes do not count towards the employee’s state benefit entitlements.

• Class 1A: Employers pay Class 1A NICs on most taxable benefits in kind provided to employees (such as company cars).  The employer calculates the contribution annually using the cash equivalent of the benefit.
• Class 1B: Employers pay Class 1B NICs on expenses and benefits included within a PAYE Settlement Agreement (PSA).

For the 2026/27 tax year, the rate for both Class 1A and Class 1B directly tracks the secondary Class 1 rate at 15%.

Class 4: Self-Employed Profits (SSCBA 1992, s 15)

Section 15 of the SSCBA 1992 charges Class 4 NICs on the profits of trades, professions, or vocations chargeable to income tax.  Unlike Class 1 or Class 2, Class 4 contributions do not count towards state benefit entitlements.  Following the April 2024 rate reductions, the main rate for Class 4 NICs stands at 6%.

Class 2 and Class 3: Voluntary Contributions

The landscape for voluntary contributions features significant recent reforms, particularly regarding the self-employed and individuals living abroad.

• Class 2: The government effectively abolished mandatory Class 2 NICs for self-employed individuals with profits above the Small Profits Threshold (£6,725) from April 2024, although these individuals automatically retain access to contributory benefits.  Individuals can still make voluntary Class 2 payments if their profits fall below the threshold.  For 2026/27, the voluntary Class 2 rate is £3.65 per week.
• Class 3: Class 3 provides a purely voluntary mechanism for individuals to preserve or enhance their entitlement to the basic State Pension and other benefits.  The Class 3 rate for 2026/27 is £18.40 per week.

2026/27 Overseas Restrictions: From 6 April 2026, new rules restrict voluntary contributions for periods abroad. The government largely removed the ability to pay voluntary Class 2 NICs while overseas, and new Class 3 applications for those abroad now require the individual to demonstrate 10 years of prior UK residency or contributions.

Key 2026/27 Thresholds Summary

The government has frozen several key NIC thresholds until April 2028, aligning them with the Income Tax Personal Allowance and Higher Rate Threshold.

Table: Principal NIC Thresholds (2026/27)

Next steps for research: Review the specific transitional provisions for existing expatriates paying voluntary Class 2 NICs before the April 2026 restrictions took effect. Additionally, verify how the £10,500 Employment Allowance interacts with the 15% secondary Class 1 rate for eligible small employers in the current tax year.