For the 2026/27 UK tax year, an employee earns £1,200 in a single week, above the Upper Earnings Limit (UEL) of £967. Which statement correctly describes their Class 1 employee National Insurance liability on the portion of earnings above the UEL?
- Earnings above the UEL are charged at 2%, a lower rate than the 8% charged between the Primary Threshold and the UEL
- Earnings above the UEL are exempt from National Insurance entirely
- Earnings above the UEL are charged at 8%, the same rate as earnings below the UEL
- Earnings above the UEL push the employee's entire week's pay into a single higher National Insurance rate
Correct answer: A. Earnings above the UEL are charged at 2%, a lower rate than the 8% charged between the Primary Threshold and the UEL
Class 1 employee National Insurance for 2026/27 charges 0% below the Primary Threshold, 8% on earnings between the Primary Threshold and the Upper Earnings Limit of £967 per week, and only 2% on any earnings above the UEL, so the rate actually falls rather than rises for the top slice of pay, which the first option correctly states and which often surprises people who expect National Insurance to keep increasing like a conventional progressive tax band. The second option is wrong because earnings above the UEL remain subject to National Insurance, just at the lower 2% rate, rather than being exempt altogether. The third option is wrong because the rate drops to 2% above the UEL rather than staying at 8%. The fourth option is wrong because UK National Insurance, like income tax, is calculated on a marginal, slice-by-slice basis across the relevant thresholds, not by pushing an entire week's pay into one single rate once any threshold is crossed.
Source: GOV.UK: National Insurance rates and categories — Class 1 employee National Insurance rates