Rates, thresholds, thresholds and the new merged payroll rules — explained for employees, employers and the self-employed.
From 6 April 2026, National Insurance enters a new era. The government's Rugby tax reform — one of the biggest changes to UK payroll since PAYE began — merged National Insurance and Income Tax into a single, unified payroll tax at the Class 1 primary threshold. The headline result: the 8% employee National Insurance rate has been abolished.
For most employees on salary, this means your payslip clearly separates:
For the 2026/27 tax year, the merged payroll threshold is aligned to the Personal Allowance of £12,570. So your first £12,570 of earnings is free from both Income Tax and the merged levy. Above that, you pay Income Tax (20%) plus the merged levy (10%) — a combined marginal rate of 30% on earnings between £12,571 and £50,270.
| Earnings bracket | Rate |
|---|---|
| Below £12,570 per year | 0% |
| £12,571 to £50,270 | 10% (merged levy) |
| Above £50,270 | 10% (no upper cap) |
The old 2% higher-rate NIC charge has gone. The merged levy applies at a flat 10% on all earnings above the threshold, with no upper earnings limit for employees.
What does this mean for your pay? If you earn £35,000, your annual merged levy is roughly £2,243 (10% of £22,430). Before the reform, you'd have paid 8% on earnings between £242 and £967 per week — roughly £1,887 in Class 1 NICs. The combined effect varies significantly by earnings level.
Following the changes announced in recent Budgets, Class 4 National Insurance for the self-employed has been folded into the same merged levy for profits above £6,725 (the Small Profits Threshold). In 2026:
Employers pay Class 1 secondary contributions. From April 2026, the employer rate is 15% on earnings above the secondary threshold of £5,000 per employee per year (unchanged from 2025). The Employment Allowance remains at £5,000 — if you're eligible, your first £5,000 of employer NICs is waived.
Even though Class 2 and Class 4 are being merged, your contribution record still counts towards the new State Pension. To qualify for the full State Pension you generally need 35 qualifying years of NICs or National Insurance credits (e.g. from claiming Child Benefit, Universal Credit, or Jobseeker's Allowance).
With the changes, qualification years are based on:
The abolition of the separate employee NICs and self-employed Class 2/4 charges doesn't mean you stop paying — the merged levy simply delivers the same money under a different name to most taxpayers. But there are a few quirks worth knowing:
Yes — but it will appear as a single line item, often labelled "Payroll Levy" or "NICs (merged)", alongside Income Tax. Your employer is obliged to show both deductions separately.
No — the government has guaranteed that the merged structure preserves current entitlement. You still build qualifying years based on your earnings or credits.
Gone. The merged levy applies at a single flat 10% rate on all earnings above £12,570 — no upper ceiling. Previously the 2% charge stopped at the upper limit; that still applies for benefit calculation purposes, but not for the levy.
Class 4 has been replaced by the merged levy at 10% above £12,570. Class 2 has been abolished as a payment, but the Small Profits Threshold of £6,725 still matters for your benefit record.