Advanced Taxation (UK) · National insurance contributions for employed and self-employed persons

Class 1 Primary and Secondary NIC in ATX-UK

Updated 11 October 2026 · Fact-checked

Class 1 NIC is charged on employees' earnings. Primary NIC is paid by the employee: 8% on earnings between £12,570 and £50,270, then 2% above. Secondary NIC is paid by the employer: 15% on earnings above £5,000 a year. Use the tax tables ACCA gives you and apply them band by band.

Understand Class 1 Primary and Secondary NIC

National insurance contributions (NIC) are a separate charge from income tax. Class 1 NIC applies to employees and their employers. It is charged on earnings, not on taxable income after allowances.

Primary Class 1 is the employee's share. It is deducted from pay through payroll. Secondary Class 1 is the employer's share. It is an extra cost to the employer on top of the salary. It is not deducted from the employee.

Both work on bands. Below a threshold the rate is nil. Above it, a rate applies. Primary NIC has two charging bands, so the rate drops after the upper limit. Secondary NIC has one threshold and then a flat rate with no upper limit.

The charge is on cash earnings: salary, wages, bonuses, commission and similar payments. Most benefits in kind are not Class 1 earnings. They are dealt with by Class 1A, which is a separate topic. Payments that are exempt from Class 1 are outside this calculation.

There is no personal allowance for NIC. Do not take any income tax allowance off before working out Class 1. Employer's NIC is also a deductible expense for the employer, which matters in company and owner-managed business questions.

Key rules to remember

Primary Class 1 (employee): Earnings £1 – £12,570: nil; £12,571 – £50,270: 8%; above £50,270: 2%; Figures are per year and come from the tax tables. Apply each rate only to the slice of earnings in that band.
Primary NIC for earnings above £50,270: (£50,270 − £12,570) × 8% + (Earnings − £50,270) × 2%; The first part is £37,700 × 8% = £3,016.
Secondary Class 1 (employer): Earnings £1 – £5,000: nil; above £5,000: 15%; Charged as (Earnings − £5,000) × 15%. There is no upper limit.
Employer's total cost of an employee: Gross pay + secondary Class 1 NIC (+ Class 1A on benefits); Employer NIC is a cost to the employer, not a deduction from the employee's pay.
Employment allowance: Reduces employer's secondary NIC by up to £10,500 a year; Used against the employer's total bill, not per employee. The allowance has its own conditions, covered in its own topic.

How to solve Class 1 Primary and Secondary NIC questions

Use this method for any Class 1 question. Work for the employee and the employer separately.

1Identify the earnings that are subject to Class 1. Include salary, bonus and commission. Leave out benefits in kind and exempt payments.
2Check the period. The tax tables give annual figures. Use them as they are for a full year.
3Compute primary NIC. Charge nil up to £12,570, 8% on the slice up to £50,270 and 2% on any excess.
4Compute secondary NIC. Charge nil up to £5,000 and 15% on the rest.
5Consider the employment allowance if the question gives an employer with a total NIC bill. Deduct it from the employer's total, not per person.
6Use the figures for the requirement: employee net pay, employer cost, or a comparison of remuneration choices. Show every working.

Quickest way: Band shortcut for NIC

When to use it: Use when earnings are above £50,270 and time is short.

Primary: write £3,016 for the full 8% band. Add 2% of the excess over £50,270.
Secondary: take earnings less £5,000, then multiply by 15%.
For a pay rise, only the extra pay matters. The marginal rate is 8% below £50,270 and 2% above for the employee, and 15% for the employer.
Sense-check: primary NIC should be well below secondary NIC for the same earnings.

Common mistakes in Class 1 Primary and Secondary NIC

Applying the 8% rate to all earnings, ignoring the £12,570 threshold.
Students treat NIC like a flat tax.
Fix: Always deduct £12,570 first. Only earnings above it are charged.
Using the £12,570 threshold for the employer.
The employee and employer thresholds look similar.
Fix: The employer's threshold is £5,000. Label each calculation as primary or secondary.
Charging 2% on all earnings once pay exceeds £50,270.
Students think the higher band replaces the lower one.
Fix: Bands are slices. The first slice up to £50,270 stays at 8%. Only the excess is 2%.
Deducting the income tax personal allowance before computing NIC.
Mixing up income tax and NIC.
Fix: NIC works on gross earnings and the NIC thresholds only.
Including taxable benefits in kind in Class 1 earnings.
They are in taxable employment income.
Fix: Benefits are usually Class 1A for the employer. Include only cash earnings in Class 1.
Forgetting that employer NIC is an extra cost on top of salary.
Students deduct it from the employee's pay.
Fix: Add it to the employer's cost. Only primary NIC reduces the employee's take-home pay.

Worked examples

Example 1

Priya earns a salary of £42,000 for 2025/26. Calculate her primary Class 1 NIC and her employer's secondary Class 1 NIC.

Show the solution

Primary: earnings above £12,570 are charged at 8% because £42,000 is below £50,270.
£42,000 − £12,570 = £29,430.
£29,430 × 8% = £2,354.40, which is £2,354 to the nearest £.
Secondary: £42,000 − £5,000 = £37,000.
£37,000 × 15% = £5,550.

Answer: Primary NIC is £2,354 and secondary NIC is £5,550.

Example 2

Marcus earns a salary of £48,000 plus a cash bonus of £12,000 in 2025/26. He also has a company car with a taxable benefit of £5,000. Calculate his primary NIC, the employer's secondary NIC on these items, and the employer's total cost of salary and bonus including NIC.

Show the solution

Class 1 earnings are salary plus bonus: £48,000 + £12,000 = £60,000. The car benefit is excluded because it is subject to Class 1A, not Class 1.
Primary 8% band: (£50,270 − £12,570) = £37,700 × 8% = £3,016.
Primary 2% band: (£60,000 − £50,270) = £9,730 × 2% = £194.60.
Total primary = £3,016 + £194.60 = £3,210.60, which is £3,211 to the nearest £.
Secondary: (£60,000 − £5,000) = £55,000 × 15% = £8,250.
Employer's cost of pay: £60,000 + £8,250 = £68,250.

Answer: Primary NIC is £3,211, secondary NIC is £8,250, and the employer's cost of salary and bonus is £68,250.

Exam tips

Copy the NIC table from the tax tables into your working before you start. Do not rely on memory for the bands.
Label every figure as primary or secondary. Markers give credit for clear labelling even if a number is wrong.
Spot that benefits in kind are outside Class 1. Say so in one sentence to earn a mark.
In advice questions, state the marginal rates. The employer's 15% is often the key point when comparing salary against other rewards.
Show workings to the nearest £ as the supplementary instructions require.

Practice questions from National insurance contributions for employed and self-employed persons

Class 1 Primary and Secondary NIC in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsClass 1 Employee NIC

Class 1 Primary and Secondary NIC: frequently asked questions

What is the difference between primary and secondary Class 1 NIC?

Primary Class 1 is paid by the employee and deducted from their pay. Secondary Class 1 is paid by the employer on top of the pay. They have different thresholds and rates.

What are the Class 1 rates and thresholds in ATX-UK?

Employee: nil up to £12,570, 8% to £50,270 and 2% above. Employer: nil up to £5,000 and 15% above. These are in the tax tables for the Finance Act 2025 exams, which run from June 2026 to June 2027.

Does Class 1 NIC apply to benefits in kind?

Generally no. Class 1 applies to cash earnings. Most benefits in kind attract employer Class 1A NIC instead, which is studied as a separate topic.

Can the employment allowance reduce the employer's Class 1 NIC?

Yes, it can reduce the employer's secondary NIC bill by up to £10,500 a year if the employer qualifies. It applies to the total bill, not to each employee.