National Insurance categories: which one applies to your staff
National Insurance contributions are not one-size-fits-all. HMRC uses a letter system — NI category letters — to tell payroll software how to calculate contributions for each employee. Using the wrong category results in incorrect NI deductions, incorrect employer contributions, and a potential liability to HMRC for the difference. Understanding which letter applies to which employee is one of the foundational skills of running PAYE payroll.
The most common category is A. Category A applies to most employees under state pension age who are not in any of the special categories described below. At this category, employees pay 8% NI on earnings between the Primary Threshold and the Upper Earnings Limit, and 2% above that. Employers pay 15% on earnings above the Secondary Threshold.
Category B applies to married women and widows who have a valid election to pay reduced NI (the "married woman's stamp"). These elections were closed to new applicants in 1977, so very few employees under 65 hold one. If an employee presents one, verify its validity with HMRC before applying it.
Category C applies to employees who are over state pension age. Employees over state pension age do not pay employee NI contributions — they have no personal NI liability. Employers continue to pay employer NI on their earnings. If you employ someone past retirement age, check their state pension age and switch them to Category C when they reach it.
Category D applies to mariners employed on ships that are not foreign-going. It is rarely encountered outside the shipping industry.
Category F, I, K, and S relate to contracted-out pension schemes, which were abolished in 2016 with the introduction of the single-tier state pension. These categories should not be active for employees who joined after 2016, and if they appear in legacy payroll data, they should be updated.
Category H applies to apprentices under 25 earning below the Upper Apprentice Threshold. Employer NI is zero for employees in this category — a significant saving for employers who take on a high volume of young apprentices. Verify that the apprenticeship is genuine and registered before applying this category.
Category M applies to employees under 21 who are not apprentices. Employer NI is zero on earnings up to the Upper Secondary Threshold (equal to the Upper Earnings Limit). Employee NI is calculated at normal rates. This is a meaningful benefit for businesses employing younger workers at scale.
Category J applies to employees who are deferring NI — typically employees with more than one job who have already passed the annual NI ceiling in their primary employment. They can apply to defer NI in their secondary employment. HMRC issues a deferment letter confirming the arrangement.
Category X is used for employees with earnings below the lower earnings limit — below the NI threshold — where contributions are not required but the employment period still needs to be recorded. Common for very low-hours workers.
For company directors, NI is calculated using the annual method rather than the period-by-period method. See our guide on directors NI: the annual method explained for the specific calculation approach.
See PAYE explained for the broader payroll framework within which NI categories operate.
Mellow assigns NI categories based on employee profile — age, apprenticeship status, pension age — and flags where a category may need reviewing. [Start a free trial →](https://mellowhr.com/register)