Class 1 is deducted from employees' pay automatically. For 2026/27 you pay 8% on earnings between the £12,570 primary threshold and the £50,270 upper earnings limit, and 2% on everything above that. Unlike income tax it is calculated per pay period, not cumulatively over the year.
Each year you earn above the lower earnings limit adds a qualifying year towards your State Pension, even in the band where employee contributions are effectively free. Salary sacrifice arrangements reduce Class 1 for both you and your employer, making them the most efficient route into a pension.
On a £55,000 salary you pay 8% on the £37,700 between the thresholds (£3,016) and 2% on the £4,730 above the upper limit (£94.60), a total of £3,110.60. Notice how little the top slice costs: above £50,270 each extra £1,000 of salary carries only £20 of NI, while income tax becomes the bigger deduction.
