Until 30 September
Key takeaways
Company directors pay Class 1 National Insurance, but calculation rules differ from standard employees.
NICs for directors are usually calculated on an annual (cumulative) basis, not per pay period.
Two calculation methods exist: cumulative (annual) and alternative (per pay run).
Annual thresholds apply to directors, even if they are paid monthly or irregularly.
The rules remain unchanged for the 2025/26 tax year, making 2026 planning more predictable.
When running a UK company, understanding how directors’ National Insurance contributions (NICs) work is essential for staying compliant and planning payroll costs accurately.
Although directors often receive a salary like employees, National Insurance for directors follows specific rules that can affect how much NIC is paid, when it’s calculated, and which thresholds apply. These rules remain in force for the 2025/26 tax year.
What is National Insurance for company directors?
In the UK, a company director is classed as an office holder rather than a standard employee. This status affects how National Insurance contributions are calculated.
Directors pay Class 1 NICs, just like employees, but HMRC treats their earnings differently. Instead of assessing contributions separately each pay period, NICs are often assessed across the whole tax year.
This approach is designed to reflect the fact that directors may:
receive irregular pay
be paid annually or sporadically
join or leave the company mid-year
How is National Insurance calculated for directors?
There are two methods for calculating directors’ National Insurance:
The cumulative (annual) method
This is the default and most common method.
Under the cumulative method:
NICs are calculated using annual thresholds
Contributions are assessed on total earnings to date
Adjustments are made automatically if earnings fluctuate during the year
This method ensures directors pay the correct total NIC by the end of the tax year, even if their pay pattern changes.
The alternative (non-cumulative) method
Some companies choose to calculate NICs:
per pay period, similar to standard employees
without annual reconciliation.
This alternative method must be applied consistently for the entire tax year and is less common, as it can lead to over or underpayment if earnings vary.
Directors’ National Insurance rates and thresholds (2025/26)
For the 2025/26 tax year, the main thresholds remain:
| Threshold / Rate | Annual amount |
|---|---|
| Primary Threshold | £12,570 |
| Upper Earnings Limit (UEL) | £50,270 |
| Employee NIC rate | 8% |
| Employee rate above UEL | 2% |
| Employer NIC rate | 13.8% |
These thresholds apply annually for directors using the cumulative method, regardless of how often they are paid.
Want to experience the future of payroll?
What is the difference between directors vs employees?
Although both pay Class 1 NICs, there are key differences:
| Aspect | Directors | Employees |
|---|---|---|
| NIC status | Office holder | Employee |
| Thresholds | Annual | Per pay period |
| Calculation | Usually cumulative | Non-cumulative |
| Pay frequency | Often irregular | Usually regular |
| NIC adjustment | Year-end balancing | None |
Understanding this distinction is essential for accurate payroll processing and avoiding HMRC errors.
Do employers pay National Insurance for directors?
Yes. UK employers must pay Employer National Insurance contributions (NICs) on a director’s earnings, just as they do for employees.
Key points to keep in mind:
Employer NICs are charged at 13.8% on earnings above the secondary threshold
For directors, these contributions are usually calculated on an annual (cumulative) basis, alongside employee NICs
This means employer NIC liability can change over the course of the tax year, depending on total earnings
Employer NICs are paid by the company, not deducted from the director’s salary
For director-shareholders, this is an important consideration when deciding how much salary to pay versus dividends, as employer NICs can significantly increase the overall cost to the business.
How to use a payroll software to calculate National Insurance for company directors?
A key way in which a payroll software helps small businesses drastically reduce the amount of time spent on payroll is by automating fiddly calculations. This includes National Insurance. Handily, rates for the forthcoming tax year are coded into the platform at the end of the previous one, so there’s never any doubt that the calculations made to employee and director payroll are the right ones.
In employee records within their dashboard, company admins are able to specify whether or not that employee is a company director, as well as which calculation method should be used.
It’s then a matter of hitting ‘Save’, and everything else is done automatically, with payslips as well as the EPS/FPS records updating in real time. Moreover, automated payroll softwares even create these submissions automatically, collating them in a handy reporting section that lets you know the amounts due to HMRC plus the payment deadlines.
Want to experience the future of payroll?
