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Understanding National Insurance Rates and Categories
National Insurance (NI) contributions are a crucial part of running payroll, but the system uses different category letters to determine how much employees and employers pay. Most employees fall into category A, but understanding the full range of categories—from A to Z—ensure...
Introduction
National Insurance (NI) contributions are a crucial part of running payroll, but the system uses different category letters to determine how much employees and employers pay. Most employees fall into category A, but understanding the full range of categories—from A to Z—ensures you're deducting and paying the correct amounts based on each worker's circumstances.
What are National Insurance category letters?
Category letters are codes that employers use when running payroll to calculate how much National Insurance both the employee and employer need to contribute. These letters appear on payslips and determine the rate of contributions based on the employee's specific situation.
Most employees have category letter A, which applies to all standard employees. However, different letters apply to specific groups, such as apprentices, those over State Pension age, married women with reduced rate certificates, and employees working in designated economic zones like freeports and investment zones.
Employee contribution rates for 2026/27
From 6 April 2026 to 5 April 2027, employees pay National Insurance on their earnings above certain thresholds. The rates depend on their category letter and how much they earn.
Earnings thresholds
- £129 to £242 per week (£559 to £1,048 per month): varies by category
- £242.01 to £967 per week (£1,048.01 to £4,189 per month): main rate applies
- Over £967 per week (£4,189 per month): reduced rate applies
Standard categories (A, F, H, M, N, V)
These employees pay:
- 0% on earnings between £129 and £242 per week
- 8% on earnings between £242.01 and £967 per week
- 2% on all earnings above £967 per week
Reduced rate categories (B, E, I)
Married women and widows with a certificate of election pay:
- 0% on earnings between £129 and £242 per week
- 1.85% on earnings between £242.01 and £967 per week
- 2% on all earnings above £967 per week
Deferral categories (D, J, L, Z)
Employees who defer National Insurance because they're already paying it in another job pay:
- 0% on earnings between £129 and £242 per week
- 2% on earnings between £242.01 and £967 per week
- 2% on all earnings above £967 per week
No contribution categories (C, K, S)
Employees over State Pension age pay no employee National Insurance contributions.
Example calculation
If an employee in category A earns £1,000 in a week, they'll pay:
- Nothing on the first £242
- 8% (£58) on earnings between £242.01 and £967
- 2% (£0.66) on the remaining earnings above £967
This means their National Insurance payment will be £58.66 for the week.
Employer contribution rates for 2026/27
Employers pay National Insurance on employee earnings above £96 per week (£417 per month). From 6 April 2026 to 5 April 2027, the standard employer rate is 15% on all earnings above this threshold.
Standard employer contributions
For most categories (A, B, C, J), employers pay:
- 15% on earnings from £96 to £481 per week (£417 to £2,083 per month)
- 15% on earnings from £481.01 to £967 per week (£2,083.01 to £4,189 per month)
- 15% on all earnings over £967 per week (£4,189 per month)
Reduced employer contributions (categories D, E, F, I, K, L, N, S)
These categories receive partial or full relief from employer contributions on lower earnings bands, with 15% applying to the highest earnings band.
Zero employer contributions on lower bands (categories H, M, V, Z)
Apprentices under 25 (category H), employees under 21 (category M), armed forces veterans in their first civilian job (category V), and employees under 21 deferring contributions (category Z) attract 0% employer National Insurance on earnings up to £967 per week, with 15% applying only to earnings above this threshold.
Main category letters explained
Category A: The standard category for most employees who don't fall into any other group.
Category B: Married women and widows holding a certificate of election showing they're entitled to pay reduced National Insurance.
Category C: Employees over State Pension age who don't pay employee contributions.
Category H: Apprentices under 25, providing employer National Insurance relief on earnings up to £967 per week.
Category J: Employees who defer National Insurance because they're already paying it in another job.
Category M: Employees under 21, offering employer National Insurance relief on earnings up to £967 per week.
Category V: Employees working in their first job since leaving the armed forces (veterans), with employer National Insurance relief on earnings up to £967 per week.
Category Z: Employees under 21 who defer National Insurance because they're already paying it in another job.
Category X: Employees who don't have to pay National Insurance, such as those under 16.
Freeport category letters
Employers with eligible employees working in freeports use special category letters that provide National Insurance relief:
Category F: Standard freeport employees
Category I: Married women and widows in freeports with reduced rate certificates
Category L: Freeport employees deferring contributions
Category S: Freeport employees over State Pension age
Investment zone category letters
Employers with eligible employees working in investment zones use these category letters:
Category N: Standard investment zone employees
Category E: Married women and widows in investment zones with reduced rate certificates
Category D: Investment zone employees deferring contributions
Category K: Investment zone employees over State Pension age
Class 1A and Class 1B contributions
Employers also pay Class 1A and Class 1B National Insurance on expenses and benefits they give to employees, such as company cars or private medical insurance. The rate from 6 April 2026 to 5 April 2027 is 15%.
Employers must also pay Class 1A on certain other lump sum payments, including redundancy payments above the tax-free threshold.
Finding your category letter
Employees can find their National Insurance category letter on their payslip. If you're unsure which category applies to a particular employee, check their circumstances against the groups listed above or consult HMRC guidance.
Sources
This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.
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