---
title: "UK Tax and Payroll 2026 | NIC, PAYE, Pension, Income Tax"
description: "UK payroll tax 2026: 15% employer NIC, 8% employee NIC, four income-tax bands up to 45%, RTI filing on or before each payday."
canonical: https://www.teamed.global/country-hiring-guides/united-kingdom/tax-and-payroll
---

United Kingdom · Tax & payroll child

Served by Teamed-owned entity: Teamed Ltd, London

# How does *UK payroll tax* work in 2026?

Employer NIC rose to 15% from April 2026. The secondary threshold dropped to £5,000. Those two changes together are the biggest shift in UK employment costs in a decade. The headline income-tax bands are frozen. The thresholds are still doing the work.

Last reviewed 12 June 2026 · United Kingdom guide

![London financial district at dusk with lit office towers reflected in the Thames.](/images/country-guides/united-kingdom-tax-payroll.webp)

Illustration · London, United Kingdom

Answer.cite this

UK employer payroll tax in 2026: the employer pays Class 1 NIC at 15% on earnings above £5,000 per year. The employer also pays 3% pension on qualifying earnings.

The employee pays 8% NIC between £12,570 and £50,270. Above £50,270 the NIC rate drops to 2%. Income tax has four bands: 0% up to £12,570, then 20%, then 40%, then 45% above £125,140.

The personal allowance of £12,570 tapers away above £100,000 income. It is fully gone at £125,140. Payroll is filed via PAYE Real-Time Information on or before each payday.

![A vintage mechanical adding machine sitting on a wooden desk.](/images/country-guides/united-kingdom-tax-payroll-polaroid-1.webp)

Adding it up

## What does an employer pay in UK NIC?

Employer Class 1 NIC is 15% on all earnings above £5,000 per year. There is no upper ceiling.

The rate rose from 13.8% to 15% from April 2026. The secondary threshold also fell from £9,100 to £5,000. Both changes together increase the employer cost on a typical salary by around £900 a year.

| Class | What it applies to | Rate | Threshold |
| --- | --- | --- | --- |
| Class 1 (employer) | Earnings, main | 15% | Above £5,000 per year secondary threshold |
| Class 1A | Benefits in kind via P11D | 15% | Annual return |
| Class 1B | PAYE Settlement Agreements | 15% | Annual |
| Apprenticeship Levy | Pay bill above £3m | 0.5% | After £15,000 allowance |

### Employment Allowance

Eligible employers can offset up to **£10,500** of their annual Class 1 NIC bill via the Employment Allowance. The £100,000 employer NIC eligibility cap was removed in 2025, opening the allowance to larger businesses for the first time. A small or mid-sized UK company can wipe out most of the NIC liability on the first £70,000 of payroll above the secondary threshold. Eligibility still excludes single-director limited companies where the director is the only employee.

### Apprenticeship Levy

If your annual pay bill exceeds **£3 million**, you pay 0.5% Apprenticeship Levy on the excess above £15,000. For a mid-market business hiring through Teamed’s EOR, the Levy typically triggers around 40 to 50 UK employees on average tech salaries. You can draw down the levy for apprenticeship training within 24 months.

## What does an employee pay in UK NIC?

Employee Class 1 NIC is 8% on earnings between £12,570 and £50,270.

Above £50,270 the rate drops to 2%. Earnings below £12,570 attract no NIC.

| Earnings band | Employee NIC rate |
| --- | --- |
| Up to £12,570 (primary threshold) | 0% |
| £12,571 to £50,270 | 8% |
| £50,271 and above | 2% |

Class 1 NIC is calculated on a weekly or monthly basis matching the payroll cycle, not annually. This matters for irregular earners. A one-off bonus is taxed differently from the same amount spread evenly across the year, because the weekly or monthly calculation method applies.

Self-employed NIC (Class 2 and Class 4) is different and outside scope here. Class 4 sits at 6% on self-employed profits between the lower and upper profit limits.

## UK income tax bands for 2025 to 2026

Income tax has four bands. The personal allowance is £12,570 a year, where you pay 0%. Then 20% up to £50,270. Then 40% up to £125,140. Then 45% above that.

All bands are frozen until 2027 to 2028. The personal allowance starts to taper above £100,000 and is fully gone at £125,140.

| Income band (2025 to 2026) | Rate | Cumulative tax at top of band |
| --- | --- | --- |
| Up to £12,570 | 0% (Personal Allowance) | £0 |
| £12,571 to £50,270 | 20% (Basic Rate) | £7,540 |
| £50,271 to £125,140 | 40% (Higher Rate) | £37,488 |
| Above £125,141 | 45% (Additional Rate) | No cap |

### The personal allowance taper above £100,000

Above £100,000 of adjusted net income, the personal allowance falls by £1 for every £2 earned. By £125,140 the personal allowance is fully withdrawn. This creates an effective marginal rate of 60% between £100,000 and £125,140. Workers in this band have a strong reason to salary-sacrifice into pension, which does not count toward adjusted net income for taper purposes.

### Scottish income tax

Scottish-resident taxpayers face different bands and rates under the Scottish Rate of Income Tax. The bands diverge meaningfully from the rest of the UK at higher earnings. Teamed’s payroll applies the correct tax code based on the employee’s residence and the HMRC-issued tax code, so Scottish employees are calculated correctly from day one.

## How does PAYE Real-Time Information work?

PAYE Real-Time Information requires employers to file a Full Payment Submission with HMRC on or before each payday.

The FPS reports earnings, tax, NIC, and pension for every employee paid. Late or missing submissions trigger automatic penalties starting at £100 per month for small employers.

HMRC · PAYE for employers

Every employer running PAYE must submit a **Full Payment Submission** on or before each payday. Submit a monthly Employer Payment Summary if no payments were made in a period. Penalties start at £100 per month for employers with up to 9 employees and reach £400 per month for large employers.

Source: [HMRC: Running payroll, reporting to HMRC](https://www.gov.uk/running-payroll/reporting-to-hmrc)

The RTI submissions an employer must file:

- **FPS (Full Payment Submission)**, on or before each payday, for every employee paid
- **EPS (Employer Payment Summary)**, monthly if claims such as the Employment Allowance apply or no FPS was sent that period
- **EYU (Earlier Year Update)**, correction submissions for prior tax years if needed

Penalties for late RTI filing:

| Employer size | Monthly late-filing penalty |
| --- | --- |
| 1 to 9 employees | £100 |
| 10 to 49 employees | £200 |
| 50 to 249 employees | £300 |
| 250 or more employees | £400 |

The penalty regime stacks. A small employer missing three monthly RTI deadlines incurs £300 in penalties before any interest on unpaid tax.

### P45, P60, P11D: what each one does

| Document | When issued | Contains |
| --- | --- | --- |
| P45 | With or shortly after the final payslip on leaving | Year-to-date pay and tax, tax code, leaving date |
| P60 | By 31 May after each tax year-end | Annual pay, income tax, and NIC for the year |
| P11D | By 6 July following the tax year-end | Benefits in kind cash-equivalent values |

Teamed runs all payroll documents end-to-end. Clients receive the outputs but do not need to administer them directly.

1. Collect pay data Gather salary, hours worked, bonuses, and any benefits in kind for the pay period before the run closes.
2. Calculate gross pay Total all earnings for the period. Include regular salary, variable pay, and any taxable benefits.
3. Deduct employee NIC and income tax Apply the employee NIC rate and HMRC-issued PAYE tax code to calculate net take-home. Student loan deductions apply where the Plan indicator is set.
4. Calculate employer NIC and pension Calculate employer Class 1 NIC at 15% above the secondary threshold, plus the 3% employer pension contribution on qualifying earnings.
5. Submit the Full Payment Submission File the FPS with HMRC on or before payday. This is the real-time reporting requirement. Late submissions trigger automatic penalties.
6. Pay HMRC and the pension provider Pay HMRC the PAYE and NIC liability by the 19th (cheque) or 22nd (electronic payment) of the following month. Pay pension contributions to the scheme within the required window.

## Pension auto-enrolment in the payroll stack

Pension contributions are 3% employer plus 5% employee. Both rates apply on qualifying earnings between £6,240 and £50,270 per year.

Every employee aged 22 or over earning more than £10,000 a year must be enrolled automatically into a qualifying pension scheme.

The three categories of worker under auto-enrolment:

- **Eligible jobholders** (aged 22 or over, earning over £10,000 a year) are enrolled on day one of eligibility
- **Non-eligible jobholders** (for example aged 16 to 21 earning over £6,240, or aged 22 or over earning £6,240 to £10,000) can opt in and receive employer contributions
- **Entitled workers** (aged 16 or over earning below £6,240) can join the scheme but do not receive employer contributions

Workers can opt out within the first month and receive a refund of contributions. After that window, opting out requires re-enrolment three years later.

### Tax relief on pension contributions

The scheme Teamed uses is a UK-qualifying defined-contribution scheme. Contributions are **tax-relieved at source** for employees, meaning the full gross contribution goes into the pension and the payslip shows a smaller net deduction.

### Student loan deductions in payroll

UK graduates with student loans repay through payroll once earnings exceed the relevant plan threshold. Plan 1, Plan 2, Plan 4 (Scotland), Plan 5, and postgraduate loans all have different repayment triggers. Repayment rates are 9% above threshold for Plans 1 to 5, and 6% for postgraduate loans. The employee’s tax code includes a Plan indicator. Teamed’s onboarding collects this data and applies the correct code from day one.

## National Minimum Wage and National Living Wage rates for 2026

Every hourly rate you set has a legal floor. From 1 April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour.

The 18-20 Year Old Rate is £10.85. The 16-17 Year Old Rate and the Apprentice Rate are both £8.00. These change every 1 April.

| Rate | From 1 April 2026 | Up from |
| --- | --- | --- |
| National Living Wage (21+) | **£12.71/hour** | £12.21 |
| 18-20 Year Old Rate | **£10.85/hour** | £10.00 |
| 16-17 Year Old Rate | **£8.00/hour** | £7.55 |
| Apprentice Rate | **£8.00/hour** | £7.55 |
| Accommodation offset (daily) | **£11.10/day** | £10.66 |

The government has signalled it wants to eventually align the 18-20 rate with the National Living Wage. The Low Pay Commission has proposed extending the National Living Wage to age 20 from 2027, then to ages 18 and 19 from 2028 or 2029, but neither is a fixed statutory date yet.

GOV.UK · The National Minimum Wage in 2026

Minimum wage rates are set annually following recommendations from the Low Pay Commission and take effect every 1 April. Underpaying the minimum wage, even by mistake, exposes an employer to HMRC enforcement, back-pay, and public naming.

Source: [GOV.UK: The National Minimum Wage in 2026](https://www.gov.uk/government/publications/the-national-minimum-wage-in-2026/the-national-minimum-wage-in-2026)

## How does Teamed handle UK payroll for you?

Teamed becomes your legal [employer of record](/employer-of-record) in the United Kingdom for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

Payroll, tax, and the full UK employment law stack run on **one platform**.

**Real HR and legal experts** handle your UK hires, from the first offer letter through every RTI submission and year-end P60. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Employer cost **passes through at cost, itemised** on every invoice.

EOR payroll, contractor onboarding, and entity setup all live on **one platform**. A UK contractor who converts to PAYE keeps their record. That same employee can **graduate** from EOR to your own UK entity without switching systems. Run the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to see the full picture. EOR is the right model for a first UK hire, **until it isn’t**. Start from [the UK hiring overview](/country-hiring-guides/united-kingdom).

Key sources: [GOV.UK employing people](https://www.gov.uk/browse/employing-people), [HMRC PAYE for employers](https://www.gov.uk/running-payroll/reporting-to-hmrc), and [ACAS employment advice](https://www.acas.org.uk/).

## Frequently asked questions

What is the employer NIC rate in the UK in 2026?

Employer Class 1 NIC is 15% on earnings above the secondary threshold of £5,000 per year. There is no upper ceiling. The rate rose from 13.8% to 15% from April 2026. Eligible employers can offset up to £10,500 of the annual bill using the Employment Allowance, which was opened to larger employers in 2025.

What NIC does a UK employee pay?

Employee Class 1 NIC is 8% on earnings between the primary threshold of £12,570 and the upper earnings limit of £50,270. Above £50,270 the rate drops to 2%. Earnings below £12,570 attract no NIC.

What are the UK income tax bands in 2026?

The 2025 to 2026 bands are: 0% on the first £12,570 (personal allowance); 20% from £12,571 to £50,270 (basic rate); 40% from £50,271 to £125,140 (higher rate); and 45% above £125,140 (additional rate). Bands are frozen until 2027 to 2028. The personal allowance tapers by £1 for every £2 earned over £100,000, creating an effective 60% marginal rate between £100,000 and £125,140.

What is PAYE RTI and when must it be filed?

PAYE Real-Time Information requires a Full Payment Submission to be filed with HMRC on or before every payday. Monthly employer contributions are due to HMRC by the 19th (cheque) or 22nd (electronic payment) of the following month. Late FPS submissions trigger penalties starting at £100 per month for employers with 1 to 9 employees.

What are the UK pension auto-enrolment rules?

Employees aged 22 or over earning more than £10,000 a year must be automatically enrolled into a qualifying pension scheme. The minimum contribution is 3% employer plus 5% employee on qualifying earnings between £6,240 and £50,270. Contributions are tax-relieved at source. Workers can opt out within the first month of enrolment.

Teamed Legal Operations

The single most common UK payroll surprise is the £100,000 cliff. A senior hire gets a £105k offer, thinks they are in the higher-rate band, and ends up at an effective 60% marginal rate on that last £5k. Salary-sacrifice pension is the standard fix. But it only works if you set it up correctly before the offer is signed.

A note from Tom Price-Daniel

UK employer NIC jumped to 15% in April 2026. The secondary threshold dropped to £5,000 at the same time. No one leading with the 15% tells you about the threshold change.  
Add 3% pension and the personal allowance taper that turns a £105k salary into a 60% marginal rate problem.  
Structure the offer first. Run the numbers before you send it.

Tom Price-Daniel · Co-founder, Teamed

## Related United Kingdom guides

- [Hiring in the United Kingdom, overview](/country-hiring-guides/united-kingdom)parent
- [UK employer cost breakdown](/country-hiring-guides/united-kingdom/cost-breakdown)sibling
- [UK benefits](/country-hiring-guides/united-kingdom/benefits)sibling
- [UK compliance and day-one rights](/country-hiring-guides/united-kingdom/compliance-and-day-one-rights)sibling
- [UK termination and severance](/country-hiring-guides/united-kingdom/termination-and-severance)sibling
- [Employer of Record overview](/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with GOV.UK and HMRC for the United Kingdom, or speak to a qualified professional, before relying on any specific framework. UK income-tax bands and NIC thresholds are frozen until 2027 to 2028. Pension auto-enrolment minimum contributions are set by The Pensions Regulator and subject to review.