Employer National Insurance changed in April 2025. Is your fleet model still using 13.8%?
7 min read · 20 August 2026. Three employer National Insurance inputs moved on 6 April 2025, and a cost model built before that date will understate all three. The rate on earnings, the rate on benefits in kind and the Secondary Threshold each changed, and they affect different parts of the calculation.
Employer National Insurance changed on 6 April 2025. The main secondary Class 1 rate rose from 13.8% to 15%, the Class 1A rate on benefits in kind rose from 13.8% to 15%, and the Secondary Threshold fell from £9,100 to £5,000 a year.
Those changes affect different parts of the employer cost calculation. Class 1 applies mainly to earnings. Class 1A applies to benefits in kind, including company cars. They should be modelled separately, because combining them into one figure produces a misleading answer.
The 2026/27 position
For the 2026/27 tax year the relevant employer figures are:
Employer secondary Class 1, above the Secondary Threshold: 15%
Class 1A on expenses and benefits in kind: 15%
Secondary Threshold: £5,000 a year, or £417 a month
Employment Allowance: £10,500, subject to eligibility
What changed, and what did not
The rate change and the threshold change are separate. The rate affects the percentage applied to the relevant amount. The threshold affects the point at which employer Class 1 NIC starts to apply at all.
Secondary Class 1 rate: 13.8% before 6 April 2025, 15% from 6 April 2025.
Class 1A rate on benefits in kind: 13.8% before 6 April 2025, 15% from 6 April 2025.
Secondary Threshold: £9,100 a year before 6 April 2025, £5,000 a year from 6 April 2025.
The threshold cut is bigger than the rate rise
The Secondary Threshold is the point at which an employer generally starts paying secondary Class 1 NIC on an employee's earnings. It fell by £4,100. For an employee whose earnings sit above both the old and the new threshold, that exposes up to £4,100 of additional pay to ordinary employer Class 1 NIC.
At 15%, the maximum additional liability is £4,100 × 15% = £615 a year.
That is a maximum before Employment Allowance or any other applicable relief, not a universal £615 cost for every employee. It also relates to ordinary Class 1 NIC on earnings, and does not apply to Class 1A NIC on a company-car benefit.
Employment Allowance is £10,500 for eligible employers in 2026/27. It can reduce qualifying employer Class 1 NIC liabilities. It does not offset Class 1A NIC on benefits in kind.
There is a longer-term effect as well. The threshold cut was an immediate policy change, but if the £5,000 threshold stays fixed while wages rise, more of the payroll sits above the point at which Class 1 NIC starts to apply. That continuing effect is fiscal drag. It describes the effect of holding the threshold fixed, not the April 2025 package as a whole.
The government has stated that the £5,000 threshold will remain in place from April 2028 until April 2031, subject to the relevant legislation being made. A threshold reviewed once and then left alone will drift out of date, so it should stay an input in forward-looking payroll and fleet models rather than a fixed assumption.
What it costs on a company car
Company cars are subject to Class 1A NIC on the taxable value of the benefit in kind, at 15% for 2026/27.
On a £40,000 petrol car at a 30% appropriate percentage, the taxable benefit is £12,000. Class 1A at the old 13.8% was £1,656 a year; at 15% it is £1,800 a year, a difference of £144 a year.
On a £40,000 battery-electric car at the 4% rate for 2026/27, the taxable benefit is £1,600. Class 1A at 13.8% was £220.80 a year; at 15% it is £240 a year, a difference of £19.20 a year.
Because the 1.2 percentage-point increase applies to the taxable benefit, the cash increase is far larger on a high-BiK petrol car than on a 4% electric one. These examples isolate the Class 1A rate change: they exclude leasing and running costs, employer pension effects, Employment Allowance, changes to the vehicle's taxable list price, and any other payroll consideration. The electric figure also rises over a contract, because the appropriate percentage steps to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30, which we set out in the four-year BIK cliff.
What it means for salary sacrifice
Salary sacrifice uses a different part of the calculation. A valid arrangement involves an employee giving up a contractual right to future cash remuneration in return for a non-cash benefit, and the contractual change must take effect before the employee becomes entitled to the pay.
Where the arrangement is effective, the employer generally does not pay secondary Class 1 NIC on the salary validly sacrificed. At 15% the potential employer NIC effect on the same sacrificed amount is larger than it was at 13.8%.
On £10,000 of sacrificed salary, the potential employer NIC effect is £1,380 at 13.8% and £1,500 at 15%, a difference of £120.
That illustrates the rate change. It is not a guaranteed saving. The actual result depends on the structure of the arrangement, the employee's pay, payroll treatment, the applicable thresholds and whether any relief or allowance applies. The arrangement must also be operated correctly: it must not reduce cash earnings below the National Minimum Wage, and the employer needs clear contractual and payroll records. Our comparison of salary sacrifice against a cash car allowance works through the employee side of the same decision.
Where the old figure still circulates
Published guidance stays online long after the rates it uses have changed. A page quoting 13.8% may be describing an earlier tax year, or may simply not have been updated. When reviewing an employer cost model, check:
The tax year the calculation covers. The employer Class 1 rate used on earnings. The Class 1A rate used on benefits in kind. The Secondary Threshold. Whether Employment Allowance is relevant and whether the employer is eligible. Whether the vehicle's appropriate percentage and taxable list price are current. Whether the salary-sacrifice arrangement has been structured and recorded correctly. And whether a fixed threshold has been allowed for in future-year modelling.
What employers should do
If your employer cost model was built before April 2025, review it rather than assuming the old figures still hold. Separate the calculations for employer Class 1 NIC on earnings, Class 1A NIC on company-car benefits, the potential employer NIC effect of any valid salary sacrifice, Employment Allowance and other applicable reliefs, vehicle appropriate percentages and taxable values, the possible fiscal-drag effect of a fixed Secondary Threshold, and the tax years the model covers.
The April 2025 changes did not create one new fleet cost. They changed several inputs that need assessing separately, and for employers comparing company cars, cash allowances and salary sacrifice the right answer depends on the whole arrangement.
Orbis IO helps employers model and manage salary sacrifice as a live fleet operation, with delivery, mileage, vehicle condition and in-life visibility through one platform. For an indicative figure you can run the salary sacrifice calculator, see how the scheme comes together on the Perx page, or talk to us about your own numbers.
This article is for general information only and is not tax, payroll or legal advice. Employers should obtain independent professional advice before implementing or changing a salary-sacrifice arrangement. Rates and thresholds change, so check the current HMRC guidance for the relevant tax year.
Frequently asked questions
What is the employer National Insurance rate for 2026/27?
The main employer secondary Class 1 NIC rate above the Secondary Threshold is 15%. The Class 1A rate on expenses and benefits in kind is also 15%. Both rose from 13.8% on 6 April 2025.
What is the employer National Insurance threshold for 2026/27?
The Secondary Threshold is £5,000 a year, or £417 a month. It fell from £9,100 a year on 6 April 2025, and the government has stated it will remain at £5,000 from April 2028 until April 2031, subject to the relevant legislation being made.
What does fiscal drag mean for employers?
In this context fiscal drag means that if the Secondary Threshold stays fixed while wages rise, more of the payroll becomes subject to employer Class 1 NIC without any rate or threshold changing again. The April 2025 threshold cut was an immediate policy change; the fiscal-drag element is the ongoing effect of holding the new threshold fixed while earnings increase.
Does the £5,000 threshold apply to company-car benefits?
No. The Secondary Threshold concerns employer Class 1 NIC on earnings. Company-car benefits are generally subject to Class 1A NIC, which is calculated on the taxable value of the benefit with no equivalent threshold.
Does Employment Allowance reduce Class 1A?
No. Employment Allowance is £10,500 for eligible employers in 2026/27 and can reduce qualifying employer Class 1 NIC liabilities, but it does not offset Class 1A NIC on benefits in kind.
Does the 15% rate make salary sacrifice more valuable to employers?
Potentially. Where a valid salary-sacrifice arrangement reduces contractual cash pay, the employer generally does not pay secondary Class 1 NIC on the sacrificed amount, so at 15% the potential effect on the same sacrificed amount is larger than it was at 13.8%. On £10,000 sacrificed the difference is £120 a year. The actual result depends on the employer's circumstances and how the scheme is structured.
Can salary sacrifice reduce an employee's pay below the minimum wage?
No. Employers must ensure salary-sacrifice deductions do not reduce cash earnings below the applicable National Minimum Wage rate for that employee.
What should employers check in an old fleet model?
Check the tax year, the employer Class 1 rate, the Class 1A rate, the Secondary Threshold, any Employment Allowance assumption, the vehicle's appropriate percentage and taxable list price, and how the salary-sacrifice arrangement is treated. A model still using 13.8% will understate the current employer NIC effect on both earnings and benefits in kind.