# Do directors pay National Insurance?

Last updated: 19 October 2026
Category: Directors

**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.

## 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.

## Frequently asked questions

### 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?](https://accounts-os.com/questions/what-is-national-insurance-for-directors)
- [How much salary should I pay myself as a director?](https://accounts-os.com/questions/how-much-salary-should-i-pay-myself)
- [What is the most tax-efficient salary for directors in 2026/27?](https://accounts-os.com/questions/what-is-the-most-tax-efficient-salary-2025-26)