With the start of the 2026/27 UK tax year (6 April 2026), employers and employees must ensure they are applying the correct National Insurance Contributions (NICs) thresholds and rates. This is particularly important for internationally connected businesses, including Japanese companies with UK operations.

This edition provides updated thresholds and rates for 2026/27, alongside practical guidance on employer and employee responsibilities.

1. NIC Thresholds and Rates (2026/27)

(Based on latest HMRC guidance and confirmed uplifts aligned with inflation policy where applicable)

Employee (Class 1 Primary NICs)

Band	Earnings	Rate
Below Primary Threshold (PT)	Up to £12,570	0%
Main rate	£12,570 – £50,270	8%
Above Upper Earnings Limit (UEL)	Over £50,270	2%

Employer (Class 1 Secondary NICs)

Band	Earnings	Rate
Below Secondary Threshold (ST)	Up to £5,000	0%
Above ST	Over £5,000	15%

Other Key Thresholds

• Employment Allowance: Up to £10,500 per eligible employer
• Apprentice Upper Secondary Threshold: £50,270
• Under 21s Upper Secondary Threshold: £50,270
• Freeport / Investment Zone relief thresholds: aligned with UEL (£50,270)

2. Employee Responsibilities

Employees are liable for Class 1 Primary NICs, automatically deducted via PAYE.

They should:

• Ensure personal details and NI number are correct
• Check payslips for accurate deductions
• Monitor contributions if working multiple jobs
• Understand that NICs impact entitlement to:
  • State Pension
  • Statutory benefits

3. Employer Responsibilities

Employers must:

• Apply correct NIC category letters
• Calculate both employee and employer NICs
• Submit payroll data via RTI (Real Time Information)
• Pay HMRC on time (monthly or quarterly)

Key cost consideration:
Employer NIC at 15% above £5,000 remains a significant employment cost and should be factored into workforce planning.

4. Key Compliance Updates for 2026/27

HMRC focus areas include:

• Increased payroll data accuracy checks via RTI
• Continued enforcement of off-payroll working (IR35)
• Alignment with Making Tax Digital (MTD) developments
• Greater scrutiny of internationally mobile employees

5. Japanese Companies Operating in the UK – Payroll & NIC Considerations

For Japanese organisations, NIC compliance often intersects with cross-border employment structures:

a) UK–Japan Social Security Agreement

• Prevents double social security contributions
• Employees seconded to the UK may remain covered in Japan
• Requires a Certificate of Coverage

Impact:
If valid → No UK NICs payable
If not → full UK NIC rules apply

b) PAYE and NIC Obligations

Japanese employers must:

• Register for PAYE if employing staff in the UK
• Operate UK payroll (even if paid from Japan in some cases)
• Consider shadow payroll arrangements

c) Short-Term Business Visitors (STBVs)

• NIC and PAYE may apply from day one
• Appendix 4 agreements can reduce admin burden

d) Exchange Rate Considerations

• Earnings paid in JPY must be converted into GBP
• HMRC-approved exchange rates should be used consistently

e) Common Risk Areas

• Misapplication of NIC exemptions under the treaty
• Incorrect NIC category letters for expatriates
• Failure to operate PAYE for secondees
• Overlooking UK duties triggering NIC liability

6. Practical Steps for 2026/27

To remain compliant:

• Update payroll systems with new thresholds and rates
• Review internationally mobile workforce arrangements
• Secure Certificates of Coverage where applicable
• Check eligibility for Employment Allowance
• Conduct periodic payroll audits

How CloudAcc Can Support You

CloudAcc support Japanese and local businesses with NIC and payroll compliance, including HMRC registrations, payroll setup, social security structuring, and application of UK–Japan social security agreements, ensuring obligations are managed efficiently while avoiding unnecessary costs and risks through practical, bilingual support.

If you need assistance, our team is here to help. You can get in touch with us to schedule a review or consultation.