Employer National Insurance 2026/27: What the April Changes Mean for Your Business

This guide shows the precise cost impact for businesses, explains the Employment Allowance increase that partially offsets the burden, and covers what the changes mean for contractors working inside IR35 and umbrella company workers.

Secondary threshold

the £5,000 per year earnings point above which an employer starts paying employer National Insurance, frozen to April 2031.

Employer National Insurance rate

15% on earnings above the secondary threshold, charged to the business, not the employee.

Class 1A

the 15% charge on taxable benefits in kind, such as a company car.

Employment Allowance

a relief of up to £10,500 off the annual employer NI bill, available to eligible employers but not to a company whose only paid employee is the director.

Upper secondary threshold

the £50,270 point up to which under-21s and under-25 apprentices attract 0% employer NI.

Employer National Insurance is the cost of paying a salary. For a director deciding between salary and dividends, weigh it against corporation tax at corporation tax rates 2026/27 and dividend tax at dividend tax rates 2026/27, since a salary is a deductible expense but dividends are not.

To cost a specific salary including employee deductions, use the Income Tax Calculator and the Salary Calculator.

What Changed From April 2026

The rate rise of 1.2 percentage points and the threshold drop of £4,100 compound together. For every employee, employers now pay NI on a larger slice of their earnings at a higher rate.

Extra Cost Per Employee From the April 2026 Changes

The following table shows the additional annual employer NI cost attributable to the 2025 changes compared to the prior year position:

The disproportionate impact on lower earners is notable. A £15,000 salary sees employer NI rise from £827 to £1,500: an 81% increase. This reflects the secondary threshold dropping from £9,100 to £5,000. A low-earning part-time worker who previously attracted £827 in employer NI now costs £1,500, a significant burden for businesses employing large numbers of part-time or low-paid staff such as hospitality, retail, and care sectors.

The Employment Allowance: Who Qualifies and How Much It Saves

The Employment Allowance was simultaneously increased from £5,000 to £10,500 to soften the impact on smaller businesses. Eligible employers can deduct up to £10,500 from their total employer NI liability each year.

Who qualifies:

• Businesses and charities with an employer NI liability below £100,000 in the previous tax year
• Connected businesses share a single Employment Allowance
• Sole directors with no other employees do not qualify

Who does not qualify:

• Public bodies such as local authorities, NHS trusts, and government departments
• Companies where the sole employee is also a director and holds more than 20% of shares

For a small business with five employees averaging £28,000 each, the total employer NI bill in 2026/27 would be approximately £17,250. With the £10,500 Employment Allowance, the net liability falls to £6,750. Without the Employment Allowance (under the old rules), the same business would have paid approximately £14,260. The Employment Allowance effectively offsets a significant portion of the rate rise for qualifying small businesses.

Impact on Inside-IR35 Contractors and Umbrella Workers

This change is particularly significant for contractors deemed to be inside IR35. When a contractor is inside IR35, the deemed employer (either the end client or the fee-payer) is responsible for employer NI contributions on the contractor's earnings. The increase from 13.8% to 15% on a day rate of £500 over a full year (approximately £130,000 gross) adds roughly £1,560 to the employer NI cost per year.

For umbrella company workers, the increased employer NI is typically passed through by reducing the net pay calculation. The £130,000 umbrella worker who previously saw employer NI of around £17,094 now faces approximately £18,750, a reduction in take-home pay of roughly £1,656 per year, all else equal.

See the IR35 Calculator for a detailed comparison of inside versus outside IR35 take-home at your day rate.

Salary Sacrifice as an Employer NI Reduction Tool

Every pound of gross salary converted to a salary sacrifice pension contribution reduces employer NI by 15p (at the 2025 rate). For businesses employing large teams, actively encouraging salary sacrifice pension schemes is now a meaningful cost reduction lever.

A team of 20 employees each sacrificing an average of £2,000 per year into their pensions saves the employer: 20 x £2,000 x 15% = £6,000 per year in employer NI, in addition to the employee income tax and NI savings. Many forward-thinking businesses now run formal salary sacrifice campaigns after each April rate review.

What Businesses Should Do Now

For small businesses (fewer than 10 employees): Claim the Employment Allowance immediately if you have not done so. Make sure it is activated in your payroll software. For many small employers, the £10,500 allowance more than covers the total employer NI liability.

For medium businesses (10 to 50 employees): Model the full annual cost increase using the Employer NI Calculator. Consider promoting salary sacrifice pension arrangements to reduce the payroll NI base. Review apprenticeship and work placement structures, as apprentices under 25 attract zero employer NI below the upper secondary threshold.

For businesses with significant part-time or low-wage staff: The threshold drop to £5,000 hits this profile hardest. Consider whether contracted hours, seasonal scheduling, or benefit structures can be optimised. Note that National Minimum Wage compliance remains a non-negotiable floor.