Commission and the New Tax Year: What UK Sales Leaders Need to Budget for in April 2026

The new UK tax year starts on 6 April 2026. For most businesses, this is a payroll admin moment. For sales teams running commission, it's something to think about now.

The headline NIC rate is not changing. It stays at 15%. But the Secondary Threshold — the point at which employer NIC kicks in — is frozen at £5,000, and the government has confirmed it will stay there until April 2031. That freeze is doing quiet damage to commission budgets that were never modelled with it in mind.

Here is what is actually happening, why commission payrolls are particularly exposed, and what to do before 6 April.

What Changed — and What Didn't

The increase in employer NIC came in with the 2024 Autumn Budget and took effect from 6 April 2025. The rate rose from 13.8% to 15%, and the Secondary Threshold dropped from £9,100 to £5,000. That combination means employers now pay more NIC, on more of each employee's earnings.

For the 2026/27 tax year, the rate stays at 15% and the threshold stays at £5,000. No new rises. But no relief either. The threshold freeze is the hidden mechanism. As pay rises — whether through salary reviews, pay awards, or commission — a greater share of earnings falls within the NIC charge. The costs compound without the rate moving at all.

The HMRC guidance on rates and thresholds for employers 2025 to 2026 sets out the current position. The 2026/27 rates follow the same structure.

Why Commission Is Specifically Exposed

Base salary is predictable. You can model the employer NIC cost once, at the point of hiring or salary review, and it holds. Commission doesn't work that way.

Commission is variable. It arrives in lumps. A rep who earns £40,000 base and generates £25,000 in annual commission doesn't receive that commission in twelve neat monthly instalments. They might earn £500 in a slow month and £8,000 in a strong quarter-end month. Every pound of that commission carries employer NIC at 15%.

The maths is straightforward. A £5,000 commission payment costs the company £750 in employer NIC on top of the gross amount. A £10,000 month costs £1,500. For a team of ten reps each generating £30,000 in annual commission, the employer NIC on commission alone is £45,000 a year — before a single pound of base salary NIC is counted.

Most commission budgets are built around gross commission cost. The NIC on top of that gets buried in a general payroll line and surfaces as a variance at year-end. This is a process problem, not just a finance problem. If you don't know the true cost of each commission payment as it's processed, you can't plan accurately.

This connects directly to a broader challenge that commission-heavy teams face: the gap between what a deal is worth on paper and what it actually costs to pay out. The same spreadsheet problem that causes commission calculation errors tends to obscure the employer cost picture too.

What the Numbers Look Like

A worked example helps.

Take a sales rep earning £45,000 base with a £20,000 on-target commission. At the new rates, employer NIC applies to everything above £5,000.

On base salary alone: £45,000 minus £5,000 equals £40,000 subject to NIC. At 15%, that's £6,000 in employer NIC per year on base salary.

On commission: if they hit target and earn £20,000 in commission across the year, that's an additional £3,000 in employer NIC.

Total employer NIC for that rep: £9,000 a year. Their OTE package costs the company £74,000 — not £65,000.

Now scale that across a team. Ten reps at that package: £90,000 in employer NIC annually, around a third of which comes purely from commission. If your budget only models the base salary NIC and treats commission as a gross cost, you're running with a significant hidden liability.

For a detailed breakdown of how commission itself is taxed from the employee's perspective, see our guide to how commission is taxed in the UK.

The Freeze Problem

The frozen Secondary Threshold matters more each year because wages don't stay still.

As of April 2026, the National Living Wage rises to £12.71 per hour. Annual pay awards are running at roughly 3-4% across the private sector. Commission earnings tend to grow with revenue targets, which tend to grow each year.

Every time a rep's total earnings increase — whether from a pay rise, a higher quota, or a strong quarter — more of that increase falls within the NIC charge. The rate doesn't move, but the bill grows. By 2031, when the threshold freeze is due to end, an employer paying a £50,000 OTE package will be paying meaningfully more in NIC than the same package costs today, without any change in the headline rate.

This is particularly relevant for teams planning headcount growth. Modelling out the NIC cost of future hires using today's intuition — or last year's budget — underestimates the real cost. The gap compounds with each additional hire. If you're building a commission plan, factoring in the full employer cost from the start avoids surprises down the line.

The Employment Allowance

One relief is worth flagging. The Employment Allowance increased from £5,000 to £10,500 in April 2025, and the previous £100,000 eligibility cap was removed. For smaller teams, this can offset a meaningful portion of the employer NIC bill.

The allowance is claimed through payroll and reduces the employer NIC liability for the year. For a team generating £10,500 or less in employer NIC annually, it eliminates the bill entirely. For larger teams, it reduces it.

But it applies to the team's total employer NIC, not specifically to commission payments. It's a useful buffer for small teams, not a solution to the structural problem of unmodelled commission NIC for teams that have already exhausted the allowance.

What to Do Before 6 April

Remodel your commission budget with NIC on top. If your commission plan shows gross commission cost, add 15% to get the true employer cost. Do this at the individual level, not as an aggregate, so that you can see which months and which reps create the largest NIC exposure.

Check whether your payroll system is handling variable commission correctly. Commission paid in irregular amounts can be processed inconsistently. If your payroll software is applying NIC to commission as a separate payment rather than as part of a cumulative earnings calculation, the deductions may not be hitting the right periods. This is worth verifying with your payroll provider before the new tax year starts.

Build the NIC cost into deal economics, not just rep comp. If your business is pricing deals or setting commission rates, the employer NIC on each commission payment should factor into your cost of sale calculation. A 10% commission rate has a real cost of 11.5% once NIC is included. That might not change your plan design, but it should inform how finance models gross margin.

Review the Employment Allowance claim. If you haven't confirmed your eligibility and correctly applied the allowance in the 2025/26 tax year, do it before 5 April. The allowance doesn't carry over — it resets each tax year.

The Wider Payroll Picture

Commission is one piece of a payroll environment that has got materially more expensive over the past twelve months. Higher NIC rates, lower thresholds, rising minimum wages, and frozen income tax bands are all running at the same time.

Sales leaders don't generally manage payroll directly. But they do manage headcount decisions, commission plan design, and quota-setting — all of which feed into the numbers that end up on payroll. Understanding the full cost of commission, not just the gross payout, makes those decisions better.

The teams most exposed are the ones still running commission on spreadsheets, where the employer NIC is an afterthought calculated somewhere downstream by finance. By the time the variance surfaces, the pay cycle has already closed. Fixing it retroactively is exactly the kind of process failure that erodes trust with reps even when the error is on the company side, not theirs.

Getting this right before 6 April is simpler than fixing it in July.

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This article covers the general position on employer NIC as it applies to commission payments. Tax treatment varies depending on individual circumstances. Consult your accountant or payroll provider for advice specific to your organisation.