With the Autumn Budget 2025 just around the corner on 26 November, millions of people across the UK are asking the same question: What will it mean for my money? And one area grabbing headlines is National Insurance (NI), which is the tax most employers, employees and self-employed individuals pay to help fund the NHS, the State Pension and other benefits.
It is worth remembering that Chancellor Rachel Reeves has promised not to increase Income Tax, National Insurance or VAT for working people. Yet, with the government facing significant financial pressures, there’s growing talk of other measures, such as freezing the income thresholds at which people start paying tax and NI, or even extending National Insurance obligations to groups that have not traditionally paid it (like landlords). And, at the end of the day, these moves will affect take-home pay, pensions and eligibility for benefits.
Now, National Insurance can feel confusing. Many of us see deductions on our payslips every month but don’t fully understand what they pay for, how they’re calculated or how the Autumn Budget might change things. That is why we have prepare this guide to explain everything you need to know about National Insurance in 2025, from current rates and thresholds to how the upcoming Budget could impact your wallet, your pension and your future.
What is National Insurance?
National Insurance is a system of contributions that employers, employees and self-employed individuals make to help fund social security benefits and healthcare. It is separate from Income Tax, though it is often collected alongside it. The contributions you make determine your eligibility for certain state benefits, most notably the State Pension. Other benefits funded by National Insurance include statutory maternity pay, sickness benefits and unemployment support.
Unlike Income Tax, which goes into the general treasury, National Insurance is earmarked for specific purposes, primarily supporting the NHS and the state pension system. This means that your contributions directly impact the healthcare and benefits system you rely on. For most people, understanding NI is about more than just money, it is about understanding how much they are contributing to the services they might need in the future.
National Insurance for Employees
Employees in the UK pay what are known as Class 1 National Insurance contributions. These contributions are automatically deducted from wages along with Income Tax. So, in most cases, employees do not need to calculate them themselves. For the 2025/26 tax year, the rates are as follows:
- 8% on weekly earnings between £242.01 and £967
- 2% on weekly earnings above £967
This means that if your weekly earnings are below £242, you do not pay any National Insurance and anything above £967 is subject to the lower 2% rate. This structure ensures that low-income workers are not overly burdened while higher earners contribute proportionally more to the system.
For example,
If an employee earns £40,000 a year, they would pay 8% on the portion of their income between £12,570 and £50,270. This automatic deduction ensures that contributions are spread out over the year, avoiding large one-off payments and making it easier for workers to budget.
National Insurance for Employers
Employers are also required to pay National Insurance on behalf of their employees. For the 2025/26 tax year, the employer rate is 15% on earnings above £5,000 annually. Employers are additionally responsible for Class 1A contributions on certain benefits, including company cars and private healthcare provided to staff. This contribution is separate from the employee’s own NI payments and represents a significant cost to businesses, especially those with higher-paid staff.
For example,
If a business employs someone earning £40,000 a year, the portion of their salary above £5,000 is £35,000. The employer would therefore pay 15% of £35,000, which amounts to £5,250 in National Insurance contributions.
National Insurance for the Self-Employed
Self-employed workers pay National Insurance differently from employees. They are responsible for Class 2 and Class 4 contributions. Class 2 contributions are a flat weekly rate of £3.50 if profits exceed £6,845 a year.
Meanwhile, Class 4 contributions are a percentage of profits:
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
These contributions are calculated and submitted through the Self Assessment tax system, which the self-employed must manage themselves.
For instance,
If a self-employed individual earns £30,000 in profits per year, they would pay Class 2 contributions of £3.50 per week, totalling £182 for the year. Class 4 contributions would be 6% of profits above £12,570, which in this case is £1,046. Altogether, the self-employed individual would pay £1,228 in National Insurance contributions for the year.
It is important for self-employed people to maintain accurate records and consider voluntary contributions if there are gaps in their NI history, especially to secure entitlement to the full State Pension.
What National Insurance Could Look Like After the Autumn Budget 2025
While Chancellor Reeves has promised not to raise headline rates for National Insurance, there is widespread discussion about measures that could subtly influence how much money you and your business will get you keep in your pockets.
The Role of Thresholds
One of the most important factors shaping your National Insurance contributions is the income thresholds, which determine when you start paying NI and higher rates of Income Tax. These thresholds are currently frozen until 2028, meaning they do not automatically increase with inflation. This freeze has a direct effect on take-home pay.
For example,
Someone earning £32,000 today may find that as their wages rise due to inflation or annual pay increases, a larger portion of their income becomes liable for National Insurance. This happens even though the NI rates themselves remain unchanged, which is why frozen thresholds can sometimes feel like a hidden tax increase. Understanding this nuance is crucial for employees, employers and the self-employed.
Possible Post-Budget Changes
Although headline rates are not expected to change, analysts are watching for potential Budget proposals that could target specific groups:
How Different Groups Might Be Affected
Even if the present rates do not change, the existing freeze and potential proposals being discussed can have an impact on various group:
Why You Should Pay Attention
Even without headline rate changes, the combination of frozen thresholds, voluntary contribution adjustments and potential NI reforms can subtly affect take-home pay, pensions and future benefits. Small changes accumulate over time, so staying informed is essential for anyone earning a salary, running a business or planning for retirement.
Conclusion
As the Autumn Budget 2025 approaches, households face uncertainty over rising costs and potential tax changes. From possible National Insurance charges on rental income to broader freezes on thresholds, many in the UK worry about the impact on their disposable income and financial stability.
While the government seeks to balance revenue needs with economic growth, the coming measures will need to offer genuine relief rather than deepen existing pressures. Staying informed and planning ahead will be key.
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