National Insurance is a liability that employees and employers pay according to the employee's NI category and earnings.

Find out below how NI calculates, with an example showing an NI contributions reconciliation.

How to calculate NI

NI for employees calculates in each pay period individually. As there isn't a cumulative calculation, you don't need to check any figures from prior periods to calculate NI.

Each NI category has bands, between each of which a percentage rate is applied for NI.

To calculate NI, you need to work out how much of the employee's NIable earnings fall in each earnings band for their NI category. Then, apply the employee and employer contribution rates in each earnings band and total these values. 

You can find the thresholds and rates in your software:

1. Go to Company, then Legislation.
2. Select the NI tab.
3. If required, select the National Insurance Category dropdown to change the NI category.
4. Check the table beneath the Rates heading for the rates in each earnings bracket.

NIable earnings

The amount of an employee's pay that's subject to NI is also known as their NIable earnings. You can use this to calculate the liability due using the NI earnings bands and the contribution rates for their NI category.

The report to check this on depends on whether you've updated records yet for the period to check:

• If you haven't updated records, run the NI Contributions - Current report. Click Pre-update reports, then the Summary category to access this report
• If you've updated records, use the NI Contributions - History report. Click Reports then click the Employee category to find this report

Rounding

Some NI calculations result in more than two decimal places. HMRC have specified rules for this rounding as below, which your software automatically applies.

You only use the third decimal place, and any beyond this you won't use when rounding. If the third decimal place is:

• Five or below, you round it down
• Six or above, you round it up

For example, if an employee's NI due is calculated as:

• £55.12599, you round down to £55.12 as the third decimal place is 5
• £55.12601, you round up to £55.13 as the third decimal place is 6

Example NI calculations

The example below uses 2024/25 tax year NI rates.

NOTE: You determine the rates to apply in the calculation with the processing date, not when the employee worked the hours you're paying them.

In this example, the employee receives an income of £2000 per month, and is on NI category A.

The NI due is £76.16 for the employee, and £171.40 for the employer.