Are you a company director wondering how the 2025–26 changes to Employer’s National Insurance (NI) affect your Director’s Payroll for 2025–26? Want to optimise your salary for tax efficiency this year? You’re in the right place—read on.
From 6th April 2025, the thresholds and rates for Employer’s NI have changed. Our detailed blog post here covers the impact on both employees and businesses with multiple staff. But if you’re a sole director, the rules affect you differently.
A quick look back: 2024–25
Last year, many directors operated on a tax code of 1257L, which allowed you to earn £12,570 tax-free. This was also the threshold for Employee NI, meaning no NI was deducted on earnings up to that level.
For Employer’s NI, the threshold was lower—£9,100 per year (or £758 per month). Many directors chose this amount as their monthly salary to:
- Secure a qualifying year for their State Pension.
- Avoid triggering Employer’s NI charges.
At the time, £758 per month was the “sweet spot”—offering efficiency and compliance in one.
What’s changed for 2025–26?
For the 2025–26 tax year, things are a bit more complex. The Employer’s NI threshold has dropped to £5,000 annually (or £417 monthly). That’s quite a shift.
Here’s where it gets complicated:
- A salary of £417 per month avoids Employer’s NI but won’t qualify you for a year towards your State Pension.
- To get a qualifying year, you’ll need to earn at least £6,500 per year (or £542 per month).
- But this now creates an Employer’s NI cost of £18.75 per month, adding up to £225 for the year.
The breakdown
All those numbers can get overwhelming, so we’ve put the key thresholds into a handy table:
| Monthly Salary | Annual Salary | State Pension Qualifying Year? | Employer’s NI Payable | Impact |
| £542.00 | £6,504.00 | Yes | £225.00 per year | Qualifying year secured, small NI cost |
| £417.00 | £5,004.00 | No | £0.00 | No NI due, but no qualifying year either |
To put it simply, if you want a qualifying year toward your State Pension in 2025–26, you’ll need to accept an Employer’s NI cost of £225 across the year.
HMRC’s guidance around National Insurance for Company Directors can be found here
What should you do?
Here’s where we hand things over to our accountancy friends. The best option for your payroll setup may depend on:
- Your company’s projected profit
- Whether you plan to hire employees
- Whether another director might be appointeed during the year
Your accountant may recommend a more tailored approach based on your specific circumstances. So before making changes, check in with them, and then let us know how we can help optimise your payroll for the year.
And finally…
If you’d like to talk to us about processing your Director’s payroll for 2025–26, pick up the phone and let’s chat. We’re here to make your payroll as tax-efficient and stress-free as possible.
