NI category letters: keep the evidence behind the code
In this hypothetical, a monthly-paid employee turns 21 on 10 November 2026. They are not an apprentice and earn £2,500 a month. In October, payroll uses National Insurance category M. In November it must use A, and the employer's contributions for that employee go from nothing to £312.45. The letter in the payroll record is a decision about who qualifies, and it needs evidence behind it. This covers the ordinary categories A, M, H and C in 2026 to 2027. Directors, mariners, deferment, veterans, Freeports, Investment Zones and multiple jobs have their own categories and rules.
What the four letters mean
A applies to most employees. M is for employees under 21. H is for qualifying apprentices under 25. C is for employees over State Pension age within these ordinary categories. The last letter of a National Insurance number is not the category letter. Other categories exist, and an employee in one of them should not be moved to A by default.
M and H relieve the employer, not the employee. Under both, the employer rate is 0% up to the relevant upper secondary threshold, then 15%. The employee still pays ordinary NICs at 8% between the primary threshold and the upper earnings limit, then 2%. C works the other way: employee NICs stop and employer contributions continue.
For monthly pay in 2026 to 2027, HMRC publishes the secondary threshold as £417, the primary threshold as £1,048 and the upper limits as £4,189. Use those monthly figures as published, not annual amounts divided by 12.
Change the letter by payment date
HMRC's 2026 to 2027 further guide for employers says a payment made on or after the 21st birthday, or an apprentice's 25th birthday, uses the older-age category with the rates and limits in force on the payment date. A payment made before the birthday stays in the under-age category. If an employee qualifies both as under 21 and as an apprentice under 25, use the apprentice category.
For H, the apprenticeship must follow a recognised UK apprenticeship standard or framework, with a written agreement between the provider, apprentice and employer showing the start and expected completion dates. A job title with apprentice in it is not evidence. The CA38 tables also expect employers to hold birth-date and apprenticeship evidence.
The hypothetical in numbers
In this original hypothetical, the employee is not a director, has no special category and no other job, and is paid £2,500 of NIC earnings on 30 October and 30 November 2026. Employment Allowance, a separate employer-level offset, is left out.
Turning 21 does not change the employee's own NICs. It changes the employer's. If this employee were instead a qualifying apprentice under 25 with the required agreement, H could continue after the 21st birthday and the employer figure would stay at £0 at this pay level.
| Payday | Category | Employee NIC | Employer NIC |
|---|---|---|---|
| 30 October 2026 | M | (£2,500 - £1,048) × 8% = £116.16 | £0, pay below £4,189 |
| 30 November 2026 | A | (£2,500 - £1,048) × 8% = £116.16 | (£2,500 - £417) × 15% = £312.45 |
State Pension age
State Pension age depends on the individual and is rising, so do not assume a fixed age or that retirement and State Pension age coincide. To move an employee to C, keep a passport or birth certificate, or an existing age-exception certificate. HMRC no longer issues new CA4140 certificates. Keep reporting year-to-date figures under the old category until the end of the tax year.
Sources and context, checked :
Before each payroll run
If a category turns out to be wrong, correct that employee's record. Do not move amounts between employees to make totals agree.
- Check for 21st and 25th birthdays falling before the next payday
- Check each employee's own State Pension age date
- Hold the apprenticeship agreement, start date and expected completion date for anyone on H
- Record the category chosen, the payday it takes effect and the evidence relied on
- Keep year-to-date records under any previous category
- Check for special categories before applying A or C