Payroll Calculator 2026/27: PAYE, Employer NI & the Real Cost of a Hire

Use the payroll calculator above

Type in an employee's gross annual salary, choose their nation if you need Scottish income tax bands, and the payroll calculator returns the PAYE income tax, employee National Insurance, employer National Insurance and your minimum pension contribution. The figures below explain exactly how each line is worked out so you can sanity-check the result before it hits your payroll software.

What payroll actually involves

Running payroll means more than paying a salary. As an employer you are HMRC's collection agent. Every payday you deduct the right amount of income tax and employee National Insurance from your worker's pay, hand it over to HMRC, and report it through Real Time Information (RTI) on or before the day you pay them. On top of the salary you also owe employer's National Insurance and, for eligible staff, a pension contribution.

So there are two sides to every wage. The employee sees their gross pay shrink to take-home. You, the employer, see the gross pay grow into a larger total cost once your own contributions are added. If you only want the worker's net figure, our salary calculator handles the take-home view in detail. This page deliberately stays on the employer side: what the hire costs your business.

How the payroll calculator works

The tool runs four calculations against the same gross salary. In plain words:

• PAYE income tax = (gross salary − Personal Allowance) taxed through the bands
• Employee National Insurance = the slice of pay between thresholds at the employee rates, deducted from their wage
• Employer National Insurance = pay above the secondary threshold at 15%, paid by you on top
• Total cost of employment = gross salary + employer NI + employer pension

PAYE income tax deductions

Income tax for an employee runs through PAYE (Pay As You Earn). Everyone gets a tax-free Personal Allowance of £12,570 for 2026/27, usually shown as tax code 1257L. Above that, income is taxed in slices: 20% on the first £37,700 of taxable income (the basic rate), 40% from there up to £125,140, and 45% above that. The tax code your employee carries tells your software how much allowance to give them each period, which is why a wrong code is one of the most common payroll headaches.

Employee National Insurance (8% then 2%)

Employee Class 1 NI is deducted from the worker's pay, not from your business. For 2026/27 it is charged at 8% on earnings between the Primary Threshold of £12,570 and the Upper Earnings Limit of £50,270, then 2% on anything above £50,270. NI is worked out per pay period rather than cumulatively, so a one-off bonus in a single month can push more of that month's pay into a band and look heavier than an annual estimate suggests.

Employer National Insurance (15% over £5,000)

This is the cost employees never see and the reason a hire is dearer than the salary. Employer's secondary Class 1 NI is charged at 15% on every pound of an employee's pay above the secondary threshold of £5,000 a year. There is no upper limit on the employer side, so unlike the employee's 2% taper above £50,270, your 15% keeps applying all the way up. The standalone National Insurance calculator lets you model both halves of NI on their own.

Pension auto-enrolment

If your employee is aged between 22 and State Pension age and earns over £10,000, you must enrol them into a workplace pension. The legal minimum is 8% of qualifying earnings, of which the employer pays at least 3% and the worker covers the rest. Qualifying earnings are the band of pay above a lower limit, so the contribution is not simply 3% of the full salary. In a payroll calculator this is usually shown as a separate employer line because it adds directly to your cost.

Worked example: the true cost of a £35,000 hire

Priya runs a small design studio and wants to hire a mid-level designer on £35,000. She has used up her Employment Allowance on an earlier hire, so employer NI applies in full here. Here is what the payroll calculator shows for 2026/27.

Employee side (what comes out of their £35,000):

• Personal Allowance: £12,570, so taxable income is £35,000 − £12,570 = £22,430
• PAYE income tax: £22,430 × 20% = £4,486 (all within the basic rate)
• Employee NI: (£35,000 − £12,570) × 8% = £22,430 × 8% = £1,794.40
• Take-home pay: £35,000 − £4,486 − £1,794.40 = £28,719.60 before any pension

Employer side (what Priya pays on top):

• Employer NI: (£35,000 − £5,000) × 15% = £30,000 × 15% = £4,500
• Total cost of the hire: £35,000 + £4,500 = £39,500, before the workplace pension

The employer NI alone adds £4,500, so the designer who agreed to £35,000 actually costs Priya at least £39,500 a year. Once a minimum employer pension contribution on qualifying earnings is layered on, the figure edges higher still. That £4,500 gap is exactly why budgeting a role from the salary alone catches so many small employers out.

Worked example: a higher earner at £60,000

Now take a senior hire on £60,000, in England, with the full Personal Allowance.

• Taxable income: £60,000 − £12,570 = £47,430
• PAYE income tax: £37,700 × 20% = £7,540, plus (£47,430 − £37,700) × 40% = £9,730 × 40% = £3,892, giving £11,432
• Employee NI: (£50,270 − £12,570) × 8% = £37,700 × 8% = £3,016, plus (£60,000 − £50,270) × 2% = £9,730 × 2% = £194.60, giving £3,210.60
• Employer NI: (£60,000 − £5,000) × 15% = £55,000 × 15% = £8,250

The employer NI of £8,250 is the single largest add-on. Because the employer rate never tapers, higher salaries carry a proportionally heavier employer cost than the headline pay suggests.

2026/27 payroll rates and thresholds

These are the figures the payroll calculator uses for England, Wales and Northern Ireland. Always confirm against the official source before each tax year.

Source: gov.uk - Rates and thresholds for employers 2026 to 2027. Figures checked for the 2026/27 tax year.

Scotland and the regional split

Income tax bands differ in Scotland. If your employee is a Scottish taxpayer (their tax code starts with an S), their PAYE is calculated using Scotland's own rates and bands rather than the 20/40/45 structure above. The Personal Allowance of £12,570 is still UK-wide, and National Insurance, both the employee and employer side, is identical across the whole UK. So only the income tax line changes for a Scottish hire. If you employ staff north of the border, our Scotland tax calculator reflects the Scottish bands.

How to reduce your payroll costs legitimately

Employer NI is the line most worth managing, and there are honest ways to soften it.

• Claim the Employment Allowance. Eligible employers can reduce their annual employer's Class 1 NI bill. It is claimed through your payroll software and is not available to single-director companies with no other employees, so check your status.
• Use salary sacrifice for pensions. When an employee gives up salary in exchange for an employer pension contribution, the sacrificed amount is not subject to employer NI, lowering your bill while boosting their pension. See how the trade-off works on our salary sacrifice calculator.
• Get the salary-versus-dividend mix right for director-owners. If you run your own limited company, the balance between paying yourself a salary and taking dividends changes your overall tax and NI. Model it with the salary vs dividend calculator before you set your own pay.

None of these are loopholes. They are standard reliefs HMRC expects employers to use.

Common payroll mistakes to watch

• Budgeting from the salary alone. The biggest error is quoting a role at its gross salary and forgetting the 15% employer NI and the pension on top. Always cost a hire at its total, not its headline.
• Using the wrong tax code. A new starter without a P45 may go on an emergency code, over-deducting tax until it corrects. Check the code on every starter and act on HMRC code notices promptly.
• Forgetting NI is per period. Because NI is calculated each pay run, a bonus paid in one month is taxed differently from the same amount spread across the year. Annual estimates are a guide, not the payslip.
• Missing RTI deadlines. Your Full Payment Submission must reach HMRC on or before payday. Late or missing submissions can trigger penalties.
• Treating Scottish staff like rest-of-UK staff. If a tax code starts with S, the income tax bands differ. Apply the wrong ones and the deductions are wrong.
• Assuming the Employment Allowance always applies. A lone director with no other staff cannot claim it, so their employer NI is not reduced.

For the income tax side in isolation, our income tax calculator breaks down the PAYE bands, and company directors can model the full corporate picture with the limited company tax calculator.

These figures are estimates for guidance only and are not personal tax or financial advice. Confirm your obligations with HMRC or a qualified accountant before running live payroll.

Related calculators

To go deeper on the numbers behind a hire, try the salary calculator for the employee's take-home pay, the National Insurance calculator for both halves of NI, and the salary vs dividend calculator if you are paying yourself as a director.

Related guides

Cut the employer NI in this calculation: see the Employment Allowance guide.