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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.



Director's National Insurance Calculator

 
 

Download a free excel version of this Director NI calculator







Note: This calculator is for directors, if you want to calculate NICs for normal employees, use our employers NI calculator.


The two different methods of calculating Director NIC


There are the two main ways to calculate National Insurance for company directors: the standard method ("cumulative method") and the alternative method ("normal employee method"). Directors pay the same amount over the course of the tax year irrespectively of the method they choose.


Under the cumulative method, directors get the NI annual allowance upfront. This means that they start paying NI after the total income received to date is higher than the Primary Annual Threshold (PT) which is £11,908 for the tax year.


Under the normal employee method, NICs are spread evenly throughout the year and employees' monthly thresholds are used to calculate NI. At the end of the year, a balance payment is made to ensure that the total amount paid using the employee method is the same as the cumulative method.


Cumulative method


Under this method, directors pay NI against their total income to date after hitting the Primary Threshold (PT, £11,908). After November 6th, the government reduced the rate at which directors pay NI between the PT and the Upper Earning Limit (UEL, £50,270) as well as above the UEL. In the table below you can find the thresholds and rates for company directors' NICs before and after the changes.

Period

PT

UEL

ST

PT < Income <= UEL

Income > UEL

Income > ST

6 Apr 2022 - 5 Nov 2022

£11,908

£50,270

£9,100

13.25%

3.25%

15.05%

6 Nov 2022 - 5 Apr 2023

£11,908

£50,270

£9,100

12.73%

2.73%

14.53%

Companies pay NI once a director's total compensation exceeds the Secondary Threshold which is usually £9,100. However, as shown in the table below, the ST can be different for some NI categories.

Category

ST

A, B, C, J

£9,100

F, I, L, S

£25,000

H, M, V, Z

£50,270


Example:

Name

John

NI category

A

Annual Gross pay

£60,000

Directorship Start

24/06/2021

Method

Cumulative


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 2022. He chooses the cumulative 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 - £11,908)*13.25% = £409.69.

In July he pays (£20,000 - £11,908)*13.25% - £409.69 = £662.5


Notice that in July, NI is calculated against the total compensation received (£20,000) minus what has already been paid (£409.69). John will continue to pay £662.50 till the end of October.


It follows that at the end of October, John has paid £3,059.69 in NI contributions.


In November, due to the rate change, the NI payment is:

(£40,000 - £11,908)*12.73% -£3,059.69 = £516.42


In December he pays (£45,000-£11,908)*12.73% - £3,576.11 = £636.50


In January he pays (£50,000 - £11,908)*12.73% - £4,212.61 = £636.50


In February the total compensation exceeds also the UEL, then he pays:


(£55,000 - £50,270)*2.73% + (50,270 - £11,908) *12.73% - £4849.11 = £163.50


In March he pays:


(£60,000 - £50,270)*2.73% + (50,270 - £11,908) *12.73% - £5,012.61= £136.50


It follows that John's total NICs amount to £5,149.11 for the tax year.


You can apply the same logic to get the employer's NICs, which in this case amount to £7,395.77 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 2022, 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 £8,931 and £37,702.50, respectively. It follows that John's NICs would have amounted to £3,861.83 while the company would have paid £5,546.83.


Normal employee method


With the normal employee method, NI payments are calculated in the same way as for other employees. The only difference is that at the end of the tax year, a balance payment is made to ensure that the amount equals the one obtained with the cumulative method.

Calculating directors and employers' NI is straightforward.

 

Director NI = National Insurance rate x Income above monthly NI threshold

Employer NI = National Insurance rate x Income above monthly NI threshold

 

Director Monthly National Insurance thresholds & rates


Here you can find Directors' monthly National Insurance thresholds & rates for 2022/23 (effective from 6 Nov 2022).

Category Letter

up to £1,048

£1,048 to £4,189

Over £4,189

A, F, H, M, V

(most employees)

0%

12%

2%