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DirectorsUpdated 2026-10-19

Do directors pay National Insurance?

Quick Answer

Yes, directors pay National Insurance on salary above the primary threshold (£12,570 in 2026/27). Their company also pays employer NI at 15% on salary above £5,000.

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Detailed Explanation

Directors and National Insurance in 2026/27

Yes, company directors pay National Insurance, but they have a unique calculation method compared to regular employees.

How director NI is calculated

Directors use the annual earnings period method. Unlike regular employees whose NI is calculated each pay period, directors' NI is calculated on their total annual earnings. This means:

  • NI is worked out on cumulative earnings for the year
  • The annual thresholds apply (not weekly/monthly equivalents)
  • This prevents directors from manipulating pay periods to reduce NI

Employee (Director) NI rates 2026/27

| Earnings band | Rate | |---|---| | Up to £12,570 (Primary Threshold) | 0% | | £12,570 to £50,270 | 8% | | Over £50,270 | 2% |

Employer NI rates 2026/27

| Earnings band | Rate | |---|---| | Up to £5,000 (Secondary Threshold) | 0% | | Over £5,000 | 15% |

Key changes from April 2025

- Employer NI rate increased from 13.8% to **15%** - Secondary threshold dropped from £9,100 to **£5,000** - Employee NI rate remains at **8%** (reduced from 10% in Jan 2024)

Practical example

Director salary of £12,570: - Employee NI: £0 (salary at primary threshold) - Employer NI: (£12,570 - £5,000) x 15% = £1,136

Director salary of £50,270: - Employee NI: (£50,270 - £12,570) x 8% = £3,016 - Employer NI: (£50,270 - £5,000) x 15% = £6,791

Employment Allowance

The Employment Allowance gives eligible employers up to £10,500 off their employer NI bill. However, single-director companies with no other employees cannot claim this. If you employ at least one other person, you may be eligible.

NI on dividends

Critically, dividends are not subject to National Insurance - neither employee nor employer NI. This is the primary reason the salary-plus-dividends strategy is so tax-efficient.

State Pension implications

To build State Pension entitlement, you need to earn above the Lower Earnings Limit (£6,708 in 2026/27). Even a small salary qualifies you for a year of State Pension credits, which is valuable over a working lifetime.

Director NI and payroll

Payroll software handles the annual earnings period calculation automatically. If you run payroll monthly, the software adjusts NI each month based on cumulative earnings. The final month may show a larger or smaller NI deduction to true up the annual calculation.

Source: HMRC National Insurance Rates 2026/27

Real-World Examples

Director receiving a small salary

Sarah, a director, only draws a salary of £10,000 in the 2026/27 tax year. While she won't pay any employee National Insurance (as this is below the £12,570 threshold), her company won't pay employer's NI either as it is below the £5,000 threshold.

Director receiving a higher salary

John, a director, receives a salary of £40,000 in the 2026/27 tax year. He will pay employee National Insurance on £27,430 (£40,000 - £12,570). His company will pay employer National Insurance on £35,000 (£40,000 - £5,000).

Common Mistakes to Avoid

  • Forgetting to account for the cumulative nature of director's National Insurance when calculating monthly payroll.
  • Using the standard employee National Insurance tables for a director's payroll without annualizing the thresholds.
  • Assuming no employer National Insurance is due if the director's individual salary is below the employee NI threshold (£12,570), failing to consider the employer NI threshold (£5,000).
  • Not understanding that benefits in kind provided to a director can also be subject to employer National Insurance.

What happens if a director leaves mid-year?

The annual earnings period still applies. National Insurance is calculated on the total earnings from the start of the tax year until the director leaves, using the full annual thresholds.

How does the Employment Allowance affect a director's National Insurance?

Eligible companies can use the Employment Allowance (up to £10,500) to offset their employer National Insurance liability, potentially reducing the amount of employer NI owed on a director's salary. However, there are restrictions, such as single-director companies where the director is the sole employee.

If a director has multiple directorships, how does National Insurance work?

Each company calculates and pays employer National Insurance on the salary paid by *that* company. The director will only pay employee National Insurance if *their* total annual earnings across *all* directorships exceeds the primary threshold (£12,570). The director would need to inform HMRC if this is the case.

Are there any exceptions to paying National Insurance as a director?

Yes, directors who are above state pension age are exempt from paying employee National Insurance, although the company still pays employer National Insurance if the earnings exceed the threshold.

Practical Tips

  • Use payroll software that automatically calculates director's National Insurance based on the annual earnings period.
  • Keep accurate records of all payments made to directors throughout the tax year to ensure accurate NI calculations at year-end.
  • If a director joins or leaves the company mid-year, recalculate the NI liability immediately to avoid surprises later.
  • Consider the impact of taking a larger salary versus dividends; while dividends aren't subject to National Insurance, they are subject to income tax and have different tax implications.

Related Questions

How does National Insurance work for company directors?

Directors pay NI on earnings above £12,570/year (primary threshold). Rate is 8% on earnings between £12,570 and £50,270, then 2% above. Employers pay 15% on earnings above £5,000.

How much salary should I pay myself as a director?

Most single-director companies are best paying a salary of £12,570 per year (the personal allowance) and taking the rest as dividends. A £5,000 salary (the employer NI threshold) is too cautious for most directors.

What is the most tax-efficient salary for directors in 2026/27?

The most tax-efficient director's salary in 2026/27 is typically £12,570 (the personal allowance). This uses your full tax-free allowance while keeping NI costs low.

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