Understanding combined Tax and National Insurance
In the UK, employed individuals pay two main statutory deductions on their earnings: Income Tax and Class 1 Employee National Insurance contributions (NICs). While both fund public services, they operate with different calculation methods and rate bands.
Income Tax is calculated annually on taxable earnings above the 12,570 pound Personal Allowance, while National Insurance is levied on earnings between the Primary Threshold (12,570 pounds) and the Upper Earnings Limit (50,270 pounds) at 8%, and at 2% above that limit.
Class 1 Employee National Insurance thresholds and rates
For employees under Category A, Class 1 National Insurance applies as follows: no National Insurance is paid on earnings up to the Primary Threshold of 12,570 pounds per year. Earnings between 12,570 and 50,270 pounds are charged at the main rate of 8%.
Earnings above the Upper Earnings Limit of 50,270 pounds are subject to the upper rate of 2%. Unlike Income Tax, National Insurance does not have a high-earner threshold taper where allowances are withdrawn.
Income Tax bands alongside National Insurance
Income Tax applies at 20% on earnings between 12,570 and 50,270 pounds, 40% on earnings between 50,270 and 125,140 pounds, and 45% above 125,140 pounds in England, Wales, and Northern Ireland. Scottish residents pay Scottish devolved rates.
Combined, basic rate taxpayers face a statutory deduction rate of 28% (20% Income Tax plus 8% National Insurance) on earnings within the basic rate slice.
Worked example: 35,000 pound salary
For an employee in England earning 35,000 pounds with 0% pension contributions in the 2026/27 tax year:
1. Income Tax: 35,000 pounds minus 12,570 pounds Personal Allowance leaves 22,430 pounds taxed at 20%, equaling 4,486.00 pounds.
2. National Insurance: Earnings between 12,570 and 35,000 pounds (22,430 pounds) are taxed at 8%, equaling 1,794.40 pounds.
3. Combined Deductions: 4,486.00 pounds plus 1,794.40 pounds equals 6,280.40 pounds total deductions.
The employee takes home 28,719.60 pounds per year (2,393.30 pounds per month), with an effective overall deduction rate of 17.94%.
Impact of workplace pension deductions
Contributions into a workplace pension reduce your gross earnings for income tax calculations under net pay arrangements. Under salary sacrifice arrangements, contributions also reduce the gross pay subject to National Insurance, saving both you and your employer money.
Inputs for the tax and NI calculator
Tax year
Select the UK tax year for Income Tax and National Insurance statutory thresholds.
Gross salary (per year)
Your total yearly salary or employment earnings before statutory deductions.
Where you pay income tax
Select Scotland if your main residence is in Scotland to apply Scottish devolved income tax bands.
Workplace pension contribution
Percentage of salary contributed to your workplace pension before tax is calculated.
CALCULATOR QUESTIONS
Tax and ni calculator questions
What is the employee National Insurance rate for 2025/26 and 2026/27?
The Class 1 employee National Insurance rate is 8% on annual earnings between 12,570 pounds and 50,270 pounds, and 2% on earnings above 50,270 pounds.
Does Scotland have different National Insurance rates?
No. National Insurance is not devolved and is set UK-wide by the UK Parliament. Scottish residents pay the exact same National Insurance rates as workers in England, Wales, and Northern Ireland.
Do National Insurance thresholds match Income Tax allowances?
Yes. The National Insurance Primary Threshold is aligned with the standard UK Personal Allowance at 12,570 pounds per year.
How do salary sacrifice pensions save tax and NI?
Under salary sacrifice, you agree to reduce your gross contractual salary in exchange for an employer pension contribution. This lowers your earnings for both Income Tax and National Insurance calculations.
How does this differ from the salary calculator?
This calculator focuses specifically on the two core government deductions (Income Tax and National Insurance), whereas the full salary calculator also models student loans and employer contributions.