Employer National Insurance & Corporation Tax: What You Can Deduct
Employer National Insurance Contributions (NICs) are one of the largest costs for companies with employees. The good news: they're fully deductible for Corporation Tax purposes.
Employer NIC Rates (2025/26)
| Category | Rate | Threshold |
|---|---|---|
| Standard (Category A) | 15% | Above £5,000/year per employee |
| Under 21 (Category M) | 0% | Up to £50,270/year |
| Apprentices under 25 (Category H) | 0% | Up to £50,270/year |
The employer NIC rate increased from 13.8% to 15% from April 2025, and the threshold dropped from £9,100 to £5,000.
Corporation Tax Deduction
Employer NICs are a trading expense — deducted from your profits before calculating Corporation Tax.
Example
| Item | Amount |
|---|---|
| Revenue | £500,000 |
| Staff salaries | £200,000 |
| Employer NICs (15% above threshold) | £27,000 |
| Other expenses | £100,000 |
| Taxable profit | £173,000 |
Without the NIC deduction, your taxable profit would be £200,000 — costing an extra £6,750 in Corporation Tax at 25%.
Employment Allowance
Small businesses can claim Employment Allowance — a £10,500 reduction in your employer NIC bill (2025/26). You qualify if your employer NIC liability was under £100,000 in the previous year.
Important: Employment Allowance reduces your NIC payment but doesn't change the deduction for CT purposes. You deduct the gross employer NIC (before Employment Allowance) from your profits.
Actually — correction: you deduct the NIC you're actually liable to pay. If Employment Allowance reduces your NIC, you deduct the lower amount.
Director's Salary: Optimal Level
For owner-managed companies, the optimal director's salary for 2025/26 is a balancing act:
| Salary Level | Employee NIC | Employer NIC | CT Saving (25%) | Net Benefit |
|---|---|---|---|---|
| £12,570 (PA) | £0 | £1,135 | £3,426 | +£2,291 |
| £5,000 (NIC threshold) | £0 | £0 | £1,250 | +£1,250 |
| £50,270 (higher rate) | £4,617 | £6,791 | £14,265 | +£2,857 |
The optimal level depends on your specific situation — but for most single-director companies, a salary of £12,570 (the Personal Allowance) is the sweet spot.
What's Deductible?
All employer costs related to employees are deductible:
- ✅ Employer NICs
- ✅ Employer pension contributions
- ✅ Apprenticeship Levy (0.5% for pay bills over £3M)
- ✅ Training costs
- ✅ Recruitment costs
- ✅ Employee benefits (where taxable via P11D)
CT600 Reporting
Employer NICs aren't reported separately on the CT600 — they're part of your total expenses deducted from turnover to arrive at trading profit (Box 145).
However, your tax computation (iXBRL attachment) should itemise staff costs, which includes:
- Gross salaries and wages
- Employer NICs
- Employer pension contributions
PAYE vs Corporation Tax: Different Systems
| PAYE/NIC | Corporation Tax | |
|---|---|---|
| Filed with | HMRC (RTI) | HMRC (CT600) |
| Frequency | Monthly/quarterly | Annually |
| What's reported | Employee pay, tax, NICs | Company profits and tax |
| Deadline | 19th of following month | 12 months after period end |
You file PAYE returns throughout the year (Real Time Information), and then the employer NIC total flows into your annual CT600 as a deductible expense.
Filing your CT600? Use Taxpipe — £59, we calculate your Corporation Tax including all deductible expenses.