Directors National Insurance Calculator
National Insurance for Directors is subject to different rules than for employees. Use this director NI calculator to find how much your are paying on the standard method and on the alternative method, and read on if you want to find out how the methods differ.
Download this National Insurance calculator
Download a free spreadsheet version of this directors NI calculator. Note that this calculator is for employee NI deductions. If you want to calculate employer NI contributions use this employer NI calculator.
Two different methods of calculating director NIC
There are the two ways to calculate National Insurance for company directors, and it is up to the employer to decide which one to use.
- Standard method: NIC liabilities are calculated on an annual basis based on the cumulative earnings in the tax year in relation to the annual earnings thresholds, using the blended NI rate
- Alternative method: NIC liabilities are calculated on a monthly basis based on monthly earnings in a given month in relation to the monthly earnings thresholds and the NI rate effective in the period.
In both cases, NICs are calculated using the formula:
Employer NIC = (Income>ST) × 13.8%
Employee NIC = (UEL>Income>PT) × 11.5% + (Income>UEL) × 2%
The standard method
In the standard method, sometimes also called the cumulative method, NIC liabilities are calculated on an annual basis based on the cumulative earnings in the tax year in relation to the annual earnings thresholds taxed at the blended NI rate.
This means that NI contributions become due only after total earnings surpass the relevant annual thresholds. As a result, NICs are lower in the beginning of the year, and higher in later periods.
Employee NICs
Employee contributions are 11.5% on earnings between the Primary Threshold and the Upper Earnings Limit and 2% on earnings above the Upper Earnings Limit:
| NI category | Primary Threshold | PT Rate | Upper Earnings Limit | UEL Rate |
| all categories | £12,570 | 11.5% | £50,270 | 2.0% |
Employer NICs
Employer contributions are 13.8% on earnings above the Secondary Threshold, which differs by NI category:
| NI category | Secondary Threshold | ST Rate |
| A, B, C, J (most employees) | £9,100 | 13.8% |
| F, I, L, S (Freeport workers) | £25,000 | 13.8% |
| H, M, V, Z (apprentices and veterans) | £50,270 | 13.8% |
The alternative method
The alternative method, sometimes also called the employee method, is almost identical to how non-director employees are treated, namely the annual tax-free allowance is spread equally across the year and NICs are paid on any amounts in that month surpass the relevant monthly thresholds, subject to the NI rate effective for the pay period.
The only difference is that at the end of the tax year, a balance payment is made to ensure that the total amount paid under the alternative method is the same that would have been paid under the cumulative method.
Employee NICs
Employee contributions are 10/12%* on earnings between the Primary Threshold and the Upper Earnings Limit and 2% on earnings above the Upper Earnings Limit:
| NI category | Primary Threshold | PT Rate | Upper Earnings Limit | UEL Rate |
| all categories (start of year) | £12,570 | 12.0% | £50,270 | 2.0% |
| all categories (6 Jan onwards) | £12,570 | 10.0% | £50,270 | 2.0% |
Employer NICs
Employer contributions are 13.8% on earnings above the Secondary Threshold, which differs by NI category:
| NI category | Secondary Threshold | ST Rate |
| A, B, C, J (most employees) | £758 | 13.8% |
| F, I, L, S (Freeport workers) | £2,083 | 13.8% |
| H, M, V, Z (apprentices and veterans) | £4,189 | 13.8% |
Which method should you choose?
The regular method is best suited for company directors who are paid irregularly and/or are set to receive considerable bonuses during the tax year.
Directors should opt for the alternative method when they regularly receive a regular salary. This is because they may prefer to keep their net pay the same in every pay period.
The alternative method should be avoided when being paid irregularly. Since the employee method uses the monthly thresholds in all pay periods but the last one, which uses the annual threshold, it may happen that a director’s earnings were higher than the UEL (which is taxed at a lower rate) in some periods but not in others. This may result in directors paying more NICs than what they are actually being paid for the period.
Examples
Standard method
John has an income of £60,000 and he was nominated director on the 24th June 2021. The tax year starts on the 6th April 2023. He chooses the cumulative (i.e. regular) method. For the first two months, he does not pay any NI as his total income at the end of month 2 (i.e. May) is £10,000.
- In June he pays (£15,000 – £12,570)*10% = £291.60
- From July to January he pays £600.00
- For example in July he pays -> (£20,000 – £12,570)*12% – £291.60 = £600.00
- In February the total compensation exceeds also the UEL, then he pays: (£55,000 – £50,270)*2% + (50,270 – £12,570) *12% – £4,571.04 = £127.00
- In March the total compensation also exceeds the UEL, then he pays: (£60,000 – £50,270)*2% + (50,270 – £12,570) *12% – £4,698.04 = £100.00
It follows that John’s total NICs amount to £4,718.60 for the tax year. You can apply the same logic to get the employer’s NICs, which in this case amount to £7,024.20 for the tax year. Remember that when calculating the employer’s NI, you need to take into account only the Secondary Threshold.
Director table method
If John had started working for the company on the 6th July 2023, the thresholds would have been pro rated according to the number of weeks he would have spent as a director in the tax year. The ST would have been £9,100 * (39 weeks)/(52 weeks) = £6,825 while the PT and UEL would have been £9,427.5 and £37,702.50, respectively. It follows that John’s NICs would have amounted to £3,598.53, while the company would have paid £5,268.15.
Alternative method
Let’s suppose that John chooses to use the normal employee method. He will pay NI as a normal employee, with a balance payment at the end of the tax year (i.e. March 2024)
- By February 2023, John will have paid £4,324.54 in NI
- In March 2023, the NI payment will be: (£60,000 – £50,270)*2% + (50,270 -£12,570) *12% – £4,324.54 = £394.06
The amount John pays under the normal employee method is £4,798.04, while the company ends up paying £7,024.20. We can see that John and the company pay the same under the two different schemes.
Frequently asked questions
How much National Insurance do I pay as a Director?
You pay 11.5% above the Primary Threshold and 2% above the Upper Earning Limit.
Do employers pay NI for Directors in the UK?
UK employers are required to deduct their directors’ National Insurance contributions as well as paying additional ‘employer national insurance’ contributions of 13.8% on directors’ earnings above the Secondary Threshold.
* Married women pay a reduced rate of 3.58/5.85%
