At DNA Accountants, we know payroll changes can come as a surprise — especially when something new suddenly appears on your payslip. So here’s a guide to what’s happening and why.
What’s Changed in 2025/26 for Employer’s National Insurance on Director Payroll
From April 2025, the government increased the Employer’s National Insurance Contribution (NIC) rate from 13.8% to 15% as well as lowering the threshold from when this charge kicks in. This applies to most employers, including small limited companies where the directors are the only employees.
Employee NIC remains at 8% on earnings between the lower and upper thresholds, and 2% above that. However, for most small company directors taking a low salary, it’s the employer’s NIC that now kicks in once cumulative pay passes the annual threshold.
Why It’s Appearing Now
Directors are treated differently for National Insurance purposes. Instead of being assessed on a ‘per month’ basis like regular employees, directors’ NIC is calculated on a cumulative annual basis.
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This means your payroll software looks at everything you’ve earned since 6 April and works out how much Employer’s NIC your company should have paid so far this tax year. If your cumulative salary has now passed the Secondary Threshold, you’ll see that cost appear this month — even if you’ve been below the limit earlier in the year.
Example
If you pay yourself £1,200 per month, your total earnings might be under the threshold for the first few months of the year, so no Employer’s NIC is due. But once your total salary passes the annual limit — often around autumn — your software automatically starts charging 15% Employer’s NIC on the excess. That’s why you might suddenly see it appear now.
What This Means for You
The company pays the Employer’s NIC — not you personally. It’s an allowable business expense, so it reduces your Corporation Tax. You don’t need to take any extra action day-to-day, as it’s all processed automatically through payroll. However, the Employer’s NI is payable to HMRC along with your regular PAYE submissions — so make sure your payment method is in place. If you haven’t already, setting up a Direct Debit can make things easier and ensure payments are never missed. If you use DNA Accountants for payroll, we’ll keep monitoring the figures to make sure you’re staying tax-efficient.
Final Thoughts
The increase to 15% Employer’s NIC means small companies will see a slightly higher cost this year — especially those paying directors through payroll. It’s a good time to review your director’s salary and dividend mix for 2025/26 to make sure it’s still the most tax-efficient setup for your company.
As always, if you’re not sure whether your payroll setup is still the most tax-efficient for 2025/26, we’re happy to review it with you. Just get in touch — we’ll make sure everything’s working smoothly behind the scenes.