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DirectorsUpdated 2026-10-19

How does National Insurance work for company directors?

Quick Answer

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.

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Detailed Explanation

Director NI rules 2026/27

Directors are treated differently from regular employees. NI is calculated annually, not weekly/monthly.

Employee (Director) NI

- Threshold: £12,570/year - Main rate: 8% on earnings £12,570-£50,270 - Additional rate: 2% on earnings above £50,270

Employer NI

- Threshold (Secondary): £5,000/year - Rate: 15% on all earnings above threshold - Employment Allowance: £10,500 credit (not available to a company whose only employee is its sole director)

Optimal salary strategies

Option A: £12,570 salary - Uses personal allowance - Director NI: £0 - Employer NI: £1,135.50 - Qualifies for State Pension - Corp Tax saving on salary + ER NI

Option B: £5,000 salary - At the employer NI threshold and below the employee threshold - Director NI: £0 - Employer NI: £0 - Below the Lower Earnings Limit, so it does not earn a State Pension qualifying year on its own - Lower Corp Tax deduction

Which is better? Usually £12,570 because the employer NI cost (£1,136) is less than the Corporation Tax saved on the extra £7,570 of salary (up to £1,438 at 19% or £1,893 at 25%), you use your full personal allowance, and you earn a State Pension qualifying year.

State Pension

- Need 35 qualifying years for full State Pension - Salary must reach the Lower Earnings Limit (£6,708 for 2026/27) to qualify - Option A qualifies; Option B does not on its own

Source: HMRC National Insurance Rates 2026/27

Real-World Examples

Director with modest earnings

Sarah, a director, only draws a salary of £15,000. She'll pay 8% NI only on the £2,430 (£15,000 - £12,570) above the primary threshold, resulting in £194.40 of employee NI. Her company will pay 15% on £10,000 (£15,000 - £5,000) employer NI, resulting in employer NI of £1,500.

High-earning director

John, a director, draws a salary of £70,000. He'll pay 8% on £37,700 (£50,270 - £12,570) and 2% on £19,730 (£70,000 - £50,270), totaling £3,016.00 in main rate NI and £394.60 in additional rate NI. His company pays 15% on £65,000 (£70,000 - £5,000), totalling £9,750.00 in employer NI.

Director salary at the employer NI threshold

David takes a small salary of £5,000 to minimise NI. As his salary is at the employer threshold and below the employee threshold, neither he nor the company pays any National Insurance. He would however not earn a State Pension qualifying year at this level, because it is below the £6,708 Lower Earnings Limit for 2026/27.

Common Mistakes to Avoid

  • Failing to account for the annual director's NI calculation, which means NI can be underpaid in the early months of the tax year if using standard payroll software.
  • Forgetting that the Employment Allowance isn't available to companies where the director is the only employee.
  • Incorrectly assuming director's NI is calculated identically to employee NI, leading to errors in payroll.
  • Not reviewing salary and dividend strategies to optimise tax and NI efficiency each tax year

What happens if I have multiple directorships?

Each directorship is considered separately for employee NI purposes. Your earnings from each company are assessed against the annual threshold. However, your employer NI allowance only applies once across all connected companies.

How does paying myself dividends affect National Insurance?

Dividends are not subject to National Insurance contributions, only Income Tax. This is a key consideration when planning your remuneration strategy.

What happens if I become a director partway through the tax year?

The annual threshold for employee NI still applies. Your payroll software may need adjustments to account for this when you become a director.

What if I have employees as well as being a director?

You'll still pay employer NI on your director's salary above the threshold, and also on your employees' salaries above their individual thresholds. The Employment Allowance can then potentially offset some of these costs, if you qualify.

Practical Tips

  • Use payroll software that is specifically designed to handle director's NI calculations to avoid errors; many packages have this built-in.
  • Regularly review your salary and dividend strategy with an accountant to ensure you're optimising for both tax and National Insurance.
  • If you are the only employee, consider whether it's more tax-efficient to pay yourself a lower salary (up to the personal allowance) and take the rest as dividends, but be aware of state pension implications.
  • If you're eligible for the Employment Allowance, ensure you claim it through your payroll software each tax year.

Related Questions

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.

Do directors pay National Insurance?

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.

How much dividend can I take from my company?

You can take dividends up to your company's available profits (retained earnings). There's no legal maximum, but you'll pay dividend tax above the £500 dividend allowance.

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