Is employer’s National Insurance
tax deductible?

Yes. Employer's (secondary Class 1) National Insurance on your employees' pay is an allowable business expense (GOV.UK). Your own Class 2 and Class 4 National Insurance is not: it is tax on your own profits, not a business cost. The Employment Allowance can reduce the employer's bill by up to £10,500 a year (Employment Allowance).

When you employ someone, there are two lots of National Insurance: the employee's, deducted from their pay, and the employer's, which you pay on top. The employer's contribution is a cost of employing people and goes in staff costs. It is quite separate from the National Insurance you pay on your own self-employed profit, which is not an expense at all.

Is employer’s National Insurance tax deductible?

The HMRC rule

Salaries, bonuses, pensions, benefits, agency fees, subcontractors and employer National Insurance are allowable. Carers and domestic help are not. The rule comes from Staff expenses, Self-employment (full) notes, SA103F.

GOV.UK lists employer's National Insurance among allowable staff costs (staff expenses). The SA103F notes include employer's NICs in box 19 and tell you not to include your own NICs (SA103F notes). Eligible employers can reduce their employer's Class 1 National Insurance through the Employment Allowance (Employment Allowance).

When you can claim it

• Employer’s secondary Class 1 National Insurance on employees’ pay.
• Class 1A National Insurance on benefits in kind given to employees.
• Class 1B National Insurance under a PAYE Settlement Agreement.
• Employer’s National Insurance on family members you employ at a commercial rate.

When you cannot

• Your own Class 4 National Insurance on your profits.
• Your own Class 2 National Insurance, including voluntary contributions.
• Employee National Insurance you deducted, which is part of their gross pay rather than an extra cost.
• Penalties or interest for late payment of PAYE and National Insurance.

What to claim instead

Your own National Insurance is worked out on your profit after expenses, so the way to reduce it is to claim every allowable expense, not to claim the National Insurance itself. Employee National Insurance is already included in the gross wages you deduct.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For employer’s National Insurance, the deciding rule is staff and subcontractors: salaries, bonuses, pensions, benefits, agency fees, subcontractors and employer National Insurance are allowable. Carers and domestic help are not.

Worked example: a café with two part-time staff

A café owner pays two staff £18,000 each. Employer's National Insurance at 15% above the £5,000 secondary threshold is £1,950 each, £3,900 in total. Both the £36,000 of wages and the £3,900 are allowable. If the café qualifies for the Employment Allowance, it covers the whole £3,900, and there is nothing left to pay or claim.

Rates and thresholds

From 6 April 2025, employer's National Insurance is 15% of an employee's earnings above the secondary threshold of £5,000 a year. Lower thresholds and relief apply for some employees, such as those under 21, apprentices under 25 and qualifying veterans, where employer's National Insurance is charged at 0% up to a higher threshold. Your payroll software works this out each pay period.

The Employment Allowance

The Employment Allowance reduces an eligible employer's secondary Class 1 National Insurance by up to £10,500 a year. You claim it through your payroll software. You cannot claim it if you only employ people for personal, household or domestic work, such as a nanny or gardener, unless they are a care or support worker. The allowance reduces the bill, so you only deduct what you actually pay.

Class 1A on benefits

If you give employees benefits in kind, such as private medical insurance or a company van used privately, you pay Class 1A National Insurance on their value. Like employer's Class 1, it is allowable, along with the cost of the benefit itself. Trivial benefits and qualifying staff parties are exempt and carry no Class 1A.

Your own National Insurance

As a self-employed person, you pay Class 4 National Insurance on profits above the lower profits limit, at 6% up to the upper limit and 2% above it. Class 2 is no longer compulsory, but you can pay it voluntarily to protect your State Pension if your profits are below the small profits threshold. Neither is a business expense; both are worked out on your return.

Where it goes

Employer's National Insurance goes in wages, salaries and other staff costs, box 19 of the full self-employment pages, with the wages. For landlords employing staff to provide services, it goes in costs of services provided, box 28 of the UK property pages.

Where it goes on your return and in MTD

For a sole trader, the allowable part goes under wages, salaries and other staff costs (SA103F box 19 on the full self-employment pages). Under Making Tax Digital for Income Tax, it goes in the same category of your quarterly update, which is the category TapTax files it under when you record the cost.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

Records to keep

Keep payroll records, payslips, Full Payment Submissions to HMRC, timesheets and contracts, and for family members, evidence of the work they do and the rate you pay for it. Payroll records must be kept for three years from the end of the tax year they relate to, and business records for at least five years after the 31 January deadline.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Claiming your own Class 4 National Insurance as an expense.
• Claiming employer’s National Insurance that the Employment Allowance covered.
• Adding employee National Insurance on top of gross wages, double counting it.

Related expenses

This item sits in the wages, salaries and other staff costs category, alongside childcare, pension contributions, private health insurance, staff Christmas parties and events, staff gifts and trivial benefits and wages, including family wages. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.