National Insurance categories and the director method

How NI Class 1 calculates

For most employees, National Insurance is worked out per pay period. The calculator:

1. Takes the post-sacrifice gross pay
2. Looks up the Primary Threshold and Upper Earnings Limit for the period
3. Charges 8% employee NI between the thresholds, 2% above (FY26-27 rates for category A)
4. Charges 13.8% employer NI on everything above the Secondary Threshold

The NI category overrides these rates for specific situations.

The eight categories

Category	When to use it
A (default)	Standard employee aged 22+
B	Married woman or widow with a pre-1977 reduced-rate election (very rare legacy)
C	Employee over State Pension age, or a director paid only above the Primary Threshold
H	Apprentice under 25 — employer pays 0% NI up to the UEL
J	Employee has deferred NI elsewhere (multi-job)
M	Employee under 21 — employer pays 0% NI up to the UEL
V	Veteran in their first year of civilian employment — employer pays 0% NI up to the UEL
Z	Under 21 and deferred elsewhere (combination of M and J)

Most employees stay on category A.

Common overrides

• Hire someone under 21 — change to category M. The employer NI saving can be over £4,000 per year per employee.
• Hire an apprentice under 25 — change to category H. Same saving while they're an apprentice.
• Pay a director above the threshold — usually change to category C and turn on the Is director toggle (see below).

To set the category, open the employee detail page > Employment tab > NI category. Takes effect from the next pay run.

The director method

Directors often take variable pay — a small salary throughout the year and a bonus near year-end. Calculating NI per-period would over-deduct in the bonus month and over-deduct in many smaller ways across the year.

To handle this, Blankitt HR offers a Is director toggle on the Employment tab. When turned on, NI is calculated cumulatively across the tax year instead of per period — same shape as PAYE.

Result: small or zero NI in low-pay months, with NI catching up later if cumulative earnings cross a band.

Employment Allowance

Most employers can claim up to £10,500 (FY26-27) of employer NI relief against the year's bill. You enable it in Settings > Payroll > Employment Allowance. The relief is credited automatically against employer NI in each pay run, up to the annual cap.

Single-director-only companies aren't eligible — check HMRC's rules before turning it on.

When to switch back to A

Switch employees from M back to A on their 21st birthday. Switch from H to A when they finish their apprenticeship. Switch from V to A after one year of civilian employment.

The system doesn't flip categories automatically — it's your responsibility to update on the right date.