Employer NIC on Commission April 2026: What UK Sales Leaders Need to Budget

From 6 April 2026, the employer NIC rate remains at 15% and the Secondary Threshold stays frozen at £5,000. This means every £1,000 of commission costs an additional £150 in employer NIC. For a 10-person sales team earning £30,000 each in commission, the total NIC bill on commission alone is £45,000 per year. The frozen threshold compounds this cost year-on-year as earnings rise. Sales leaders need to remodel commission budgets to account for NIC before the new tax year to avoid end-of-year payroll variances.

TL;DR:

• The employer NIC rate stays at 15% from 6 April 2026, with the Secondary Threshold frozen at £5,000 until April 2031.
• Every £1,000 of commission paid above the threshold costs employers an additional £150 in NIC — a hidden payroll tax that most commission budgets don't include upfront.
• Commission payments are uniquely exposed because they arrive in variable lumps rather than steady monthly amounts, making the true employer cost harder to track until year-end reconciliation surfaces the variance.
• For a 10-person sales team each earning £30,000 in annual commission, the total employer NIC bill on commission alone is £45,000 per year, before any base salary NIC is counted.
• Sales leaders must remodel commission budgets with the full 15% employer cost before 6 April 2026 to avoid mid-year payroll shortfalls and plan headcount growth accurately.

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. According to HMRC guidance on payroll tax relief and secondary threshold changes, 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.

A £10,000 commission payment in April 2026 will cost UK employers £1,500 in employer NIC on top of the gross amount — a 15% hidden tax that most commission budgets don't account for upfront. This cost hits every variable payment above the £5,000 Secondary Threshold, and it scales directly with team size and commission performance. The rate hasn't changed since April 2025, but the frozen threshold means that every pay rise, quota increase, or strong sales quarter pushes more earnings into the NIC band without any corresponding adjustment to the relief threshold.

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

Commission payments carry higher employer NIC risk than base salary because they arrive in variable lumps rather than steady monthly amounts, making the true cost harder to track until year-end reconciliation surfaces the variance. Base salary is predictable: you model the employer NIC cost once, at the point of hiring or salary review, and it holds for the year. 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. When an employer pays commission above the £5,000 Secondary Threshold, 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 commission cost in 2026 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 10-person sales team where each rep hits a £65,000 OTE target (£45,000 base + £20,000 commission), the total employer cost is £740,000 per year, not the £650,000 that appears in most commission budgets. The £90,000 gap comes entirely from employer NIC, and roughly £30,000 of that is attributable to commission payments alone. This hidden cost scales linearly with team size and performance: a 20-person team at the same OTE profile carries £180,000 in annual employer NIC, with £60,000 of that sitting on top of commission. Most finance teams only discover this variance at year-end reconciliation, by which point the budget has already been exceeded and there's no room to adjust.

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.

The threshold freeze creates a compounding cost problem for growing sales teams: a 3% annual pay rise on a £65,000 OTE package adds £1,950 to gross earnings, but it also adds £292.50 to the employer NIC bill because the entire increase falls above the frozen £5,000 threshold. Over five years to 2031, that same package will have grown to roughly £75,300 through cumulative pay rises, and the employer NIC will have increased from £9,000 to £10,545 — a 17% rise in the NIC cost with no change to the headline rate. Teams planning headcount expansion need to model this compounding effect into their three- and five-year budgets, or they'll consistently undershoot their true payroll cost.

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 small sales teams managing commission, 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 smaller 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 commission 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.

Frequently Asked Questions

How much employer NIC will I pay on £10,000 in commission?

You pay 15% on the amount above the Secondary Threshold of £5,000. For a £10,000 commission payment, the employer NIC is £1,500. That assumes the employee has already exceeded the threshold through their base salary or prior payments in the tax year.

What's the difference between commission budgeted and commission cost?

Commission budgeted is the gross amount you plan to pay out to reps. Commission cost includes the 15% employer NIC on top of that gross figure. A £100,000 commission budget has a real cost of £115,000 once NIC is factored in. Most teams budget the former but get invoiced for the latter.

Does the Employment Allowance reduce NIC on commission?

Yes, but only up to £10,500 per tax year across your entire NIC liability. The allowance offsets your total employer NIC bill, not specifically commission NIC. If your total NIC is £20,000, the allowance reduces it to £9,500. If your NIC is £8,000, the allowance eliminates it entirely.

When should I recalculate my commission budget for NIC?

Before 6 April 2026, and again at each financial planning cycle. If you're setting quarterly quotas or annual OTE targets, add 15% to your gross commission forecast to arrive at the true payroll cost. Recalculate whenever you hire new reps or adjust commission rates.

Why does the frozen threshold make this worse each year?

Because wages rise but the threshold doesn't. Every pay rise, quota increase, or inflation adjustment pushes more earnings above the £5,000 threshold and into the 15% NIC band. By 2031, a £50,000 OTE package will cost meaningfully more in NIC than it does today, even though the rate hasn't changed.

---

About the Author

This article was written by the Commit Team. Commit automates commission payroll and reporting for UK sales teams, integrating directly with Xero to handle variable commission, employer NIC calculations, and end-to-end approval workflows. Learn more at commitapp.io.

---

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.

Published: 15 March 2026