That’s the “take-home” cash, the amount you actually get to keep after all the bills are paid. This layout gives you and your stakeholders a clear view of how revenue turns into profit, showing exactly where every expense chips away at the final net income figure. Net income is also referred to as net profit, net earnings, or simply the “bottom line”. We’ll cover what it means, why it matters, where it lives on your income statement, and most importantly, how to calculate it. If you need any more information or if you have any queries regarding National Insurance contributions, please get in touch with us.
Check you can afford to take on employees
- It’s the ultimate scorecard for your business’s financial health, which you can use to make informed decisions, prove your value to investors, and help you plan for growth.
- It’s reported on the income statement, which means it’s necessary for keeping up with legal and regulatory standards.
- Here’s a step-by-step guide to help you calculate the correct contributions.
The 2025 changes in National Insurance will raise the employer’s NI rate to 15% and reduce the ST threshold, meaning National Insurance will apply to a larger portion of employee earnings. National Insurance contributions are based on employee earnings and specific thresholds that differ for both employees and employers. Employers use thresholds such as the Secondary Threshold (ST) and follow rate categories to calculate National Insurance accurately. To use the calculator, enter your earnings, select the tax year, and choose your pay period.
Use these calculators and tax tables to check payroll tax, National Insurance contributions and student loan deductions if you’re an employer. National Insurance contributions also popularly known as NIC is calculated on the basis of your employment status and your earnings. There is a vast difference in the way National Insurance contributions for employed and the self employed is calculated.
Class 3 Voluntary National Insurance
- Get matched with your very own accredited accountant who will file your tax return and also give you a one-off tax advice consultation, for less.
- You won’t pay income tax either until you earn more than £12,570 a year.
- If you have profits of less than £6,725 per year, you won’t have to pay any National Insurance.
- Once your Personal Allowance has been taken away, the remaining amount will be taxed and your Personal Allowance will be left tax free.
A higher net income leads to a higher business valuation, making it easier to secure loans or attract buyers. Say your business has an EBIT of $150,000 and $30,000 in depreciation and amortization. So, it’s the measure of how much money you actually made after everything is accounted for. But don’t worry, you can still calculate net income using balance sheet information. This is the amount your business has made after subtracting all expenses.
Tax and profit
Plus, a healthy net income is a good sign to investors, showing that your business has a stable financial position and strong returns. Net income measures how much money you’re bringing in and also how well you’re managing resources. Net income is one of the most important ways to gauge how healthy your business is financially.
Decide what type of employee you need
You are only exempt from paying National Insurance in certain situations. Just enter a few details, and our calculator will take care of the rest. It tells you exactly how how to calculate ni much NI you need to pay, whether you’re employed, self-employed, or doing a bit of both. In this example, the employee receives an income of £2,000 per month, and is on NI category A.
Net income alone doesn’t tell you how efficiently your business is running. Net income can be affected by one-off events that don’t represent your business’s normal operations. What you see in your net income might not be the full story, as it’s dependent on the accounting assumptions driving those numbers. Different accounting methods like how you handle depreciation, when you recognize expenses, or how you value inventory can change your net income. It’s important to remember that not all costs are accounted for in net income, so you will want to dig a bit deeper to make sure you have a complete picture.
Our expert team is here to help you with everything from calculating your tax to filing your returns on time. Plus, if you’re eligible for any tax refunds, we’ll help you claim them too. Think of National Insurance as your contribution to the UK’s public services. We do everything for you meaning you don’t need to worry about deadlines, costly mistakes or missed opportunities. If you’re self-employed, you’ll usually need to pay via your self-assessment tax return. This calculator will allow you to check how much in National Insurance contributions an employee needs to pay.
Check your responsibilities around workplace pensions
Class 1A contributions are paid solely by employers on the value of benefits or expenses provided to employees, such as company cars or private medical insurance. Employers and employees with an NI number must contribute to national insurance. For employee NIC calculations, various brackets and classes are used to calculate how much National Insurance is paid.
More on National InsuranceRead our guide on National Insurance contributions
Calculating your employer’s National Insurance (NI) contributions accurately is essential to ensure compliance with HMRC regulations. As of April 2025, changes to employer NI rates and thresholds are set to impact businesses across the UK. Here’s a step-by-step guide to help you calculate the correct contributions.
These changes are part of the government’s ongoing efforts to adjust the tax and national insurance system to better support the economy and businesses in the coming years. Employers pay Class 1A and 1B National Insurance on expenses and benefits they give to their employees. The rate from 6 April 2025 to 5 April 2026 on expenses and benefits is 15%. This table shows how much employers pay towards employees’ National Insurance from 6 April 2025 to 5 April 2026. Until 1977, married women could opt to make National Insurance contributions at a reduced rate. They stopped building up entitlement to state pension in their own right and instead relied on their husband’s National Insurance contributions record.
They must also pay Class 1A on some other lump sum payments, for example redundancy payments. You can also use calculators and tables to check employees’ National Insurance. If you have a private or company pension and it’s your only form of income, you won’t pay National Insurance on it.
NI is paid into a government managed fund, and is taken directly from your salary automatically if you are an employee on the PAYE system – (save a few possible exceptions). If you’re self-employed you’ll need to calculate your contributions yourself when you complete your self-assessment tax-return. If you earn less than £242 a week, (or less than £12,570 a year in the current tax year, which runs from 6 April 2022 to 5 April 2023), you won’t pay NI. This is because the threshold at which a person starts paying National Insurance was increased to £12,570 in July 2022. You won’t pay income tax either until you earn more than £12,570 a year.
Both types of Class 1 NI are collected using the employer’s PAYE system. Employee NICs are deducted from salary and are based on annual earnings. National insurance is a government programme that mandates residents and workers in the United Kingdom to make regular payments toward benefits. Whether it comes to tax on rental income or dealing with Capital Gains Tax our tax calculators are here to help and they’re free to use.