National Insurance confuses many contractors. There are two types. You pay NIC as an employee. Your umbrella pays NIC as your employer. Both come from the same pot. This guide explains both. It uses 2026-27 rates.
DASA Umbrella holds dual accreditation from FCSA and Professional Passport. Both are UK independent compliance standards. Start with DASA. It is a contractor umbrella company with dual FCSA and Professional Passport accreditation. Read our umbrella contractor tax guide for the full picture.
What is National Insurance for umbrella contractors?
You pay National Insurance as an employee. Your umbrella also pays employer NIC for you. Both reduce your take-home pay. Employee NIC comes off your gross pay. Employer NIC comes from your assignment rate. It is taken before gross pay is set. You must understand both. This helps you understand your take-home pay.
NIC funds state benefits. These include the NHS and State Pension. You build qualifying years for your State Pension. You do this through NIC contributions. NIC still matters. It may feel like another tax. But it builds your pension.
Your umbrella handles all of this. It goes through PAYE. You do not need to calculate anything. But you should know the rates. This helps you check your payslips. It helps you spot errors.
NIC thresholds explained
NIC thresholds set the earnings levels. Each rate applies at a different level. Employee NIC starts at £12,570 per year. This is the Primary Threshold. Employer NIC starts lower. It starts at £5,000 per year. This is the Secondary Threshold.
The Primary Threshold and personal allowance are both £12,570. You start paying income tax and NIC at the same point.
The Upper Earnings Limit is £50,270. The employee NIC rate drops here. It goes from 8% to 2%. All earnings above this point use the lower rate.
| Threshold | Annual amount |
|---|---|
| Secondary Threshold (employer NIC starts) | £5,000 |
| Primary Threshold (employee NIC starts) | £12,570 |
| Upper Earnings Limit (lower rate starts) | £50,270 |
Employee NIC rates 2026-27
Employee NIC is 8% on earnings between £12,570 and £50,270. Above £50,270, it drops to 2%. Your umbrella deducts this from your gross pay. You see it on your payslip. It shows as employee NIC or employee National Insurance contributions.
On £40,000 gross, you pay 8% on £27,430. This is the amount between £12,570 and £40,000. That is £2,194 in employee NIC.
On £60,000 gross, you pay 8% on £37,700. You pay 2% on £9,730. The 2% applies above £50,270. That is £3,016 plus £195. The total is £3,211.
Employee NIC is not the same as income tax. It is calculated separately. You pay both on the same earnings. You pay them at the same time. They are different deductions.
What is employer NIC and who pays it?
Employer NIC is the contribution your umbrella pays. Your umbrella pays it as your employer. The rate is 15% on earnings above £5,000 per year. This is for 2026-27. Your umbrella pays this directly to HMRC. You do not see it on your payslip. But it still affects your take-home pay. It comes from your assignment rate first.
Employer NIC is a legal cost. Every UK employer pays it. Your umbrella is your employer. They must pay it.
Many umbrella workers see their assignment rate. They think it is their gross pay. It is not. The umbrella takes employer NIC from that rate first. Then it sets your gross pay.
How does the 15% employer NIC rate affect your take-home pay?
Employer NIC is 15% of earnings above £5,000. The umbrella pays it. You do not pay it directly. But it comes from your assignment rate. It is taken before gross pay is set. Every pound spent on employer NIC is a pound lost from your gross pay. The rate went up in April 2025. It increased from 13.8% to 15%. That extra 1.2% cut take-home pay. It affected contractors across every umbrella in the UK.
Here is how it works. Say your assignment rate gives £500 per week. The umbrella takes employer NIC first. At 15%, about £65 goes to HMRC. That leaves about £435 as your gross pay. Income tax and employee NIC then come off the £435.
The April 2025 increase sounds small. It went from 13.8% to 15%. At £400 per day across 46 weeks, you lose about £1,000 in gross pay each year. The umbrella does not keep that money. It goes to HMRC.
This is the top contractor pay complaint. It is a fair complaint. The rate change was not the umbrella’s decision. It applied to all UK employers. A compliant umbrella cannot avoid it.
Use our umbrella take-home pay guide. It models how employer NIC affects your rate. Or use the PAYE umbrella calculator. It shows the numbers directly.
NIC and salary sacrifice
You can reduce your NIC bill. Use salary sacrifice into a pension. Salary sacrifice moves part of your gross pay into your pension. This happens before tax and NIC. You save employee NIC on the sacrificed amount. The rate is 8%. Above £50,270, it is 2%. The umbrella also saves employer NIC. This can benefit you. It depends if your umbrella passes the saving on.
The sacrifice reduces your gross pay for NIC. A contractor sacrificing £200 per month saves £16 in employee NIC. This is at the 8% rate. Over a year, that is £192 in NIC savings. You also save on income tax.
Your umbrella must keep your rate above the National Minimum Wage. This is £12.71 per hour in 2026-27. The umbrella caps the sacrifice. It cannot take you below this level.
Read our full guide to salary sacrifice pension contributions. It has a worked example.
How do you check NIC on your payslip?
Your payslip shows employee NIC as a separate line. You see the amount deducted. You may also see a year-to-date total. Employer NIC does not appear on your payslip. Some umbrellas show it as an information line. Ask your umbrella for a full breakdown. Do this if you are unsure.
A clear payslip shows five things. It shows gross pay. It shows income tax. It shows employee NIC. It shows pension deduction. It shows net pay. Ask DASA if any line is missing.
Year-to-date figures help you track your NIC. You can see your contributions across the tax year. This matters for your State Pension. You need 35 qualifying years. This gives you the full new State Pension.
Use the pay calculator. Check if the NIC on your payslip matches. Read our how to read your umbrella payslip if the numbers do not match. It explains each line.
Frequently Asked Questions
What is employer NIC for umbrella contractors in 2026-27?
Employer NIC is 15% of earnings above £5,000. Your umbrella pays it to HMRC. It comes from your assignment rate. It is taken before gross pay is set. This reduces your take-home pay.
What are the employee NIC rates for 2026-27?
Employee NIC is 8% on earnings between £12,570 and £50,270. Above £50,270, the rate drops to 2%.
Why did the employer NIC rate increase in April 2025?
The UK government raised employer NIC in April 2025. It went from 13.8% to 15%. This was part of Budget changes. It applied to all UK employers. This includes umbrella companies. It reduced contractor take-home pay across the board.
Can salary sacrifice reduce my NIC bill?
Yes. Salary sacrifice reduces your gross pay. This is for NIC and tax. You save employee NIC on the sacrificed amount. The rate is 8% or 2%. It depends on your earnings band.
Where do I see NIC on my payslip?
Employee NIC appears as a separate line. Employer NIC may not appear. Some umbrellas show it as an information line. Ask DASA for a full breakdown. Do this if you are unsure.
What is the NIC Primary Threshold in 2026-27?
The Primary Threshold is £12,570 per year. You do not pay employee NIC below this level.
