If you're a director of a limited company, recent changes to Employers' National Insurance (NI) could significantly affect how you pay yourself. From April 2025, both the threshold and the rate have changed, meaning many directors who previously paid nothing will now face additional costs.
In this comprehensive guide, we explain everything directors need to know about the Employers' National Insurance changes 2025/26:
From April 2025, both the secondary threshold and the rate of Employers' NI have changed, creating new costs for many directors who previously paid nothing.
The secondary threshold (the point at which employers start paying NI) has reduced significantly:
£758/month (£9,100/year)
£417/month (£5,000/year)
This means employers now start paying NI much earlier on each employee's earnings.
The rate at which employers pay National Insurance has increased:
13.8%
15%
Not only are you paying NI sooner, but at a higher rate too.
This is a very common structure for owner-managed companies.
No Employers' NI Payable
Annual Cost: ~£600
A salary that previously had zero Employers' NI now creates a real annual cost of approximately £600.
Not necessarily, and in many cases, that would actually increase your tax bill.
If you don't take a salary, company profits increase, meaning you'll pay Corporation Tax first, then dividend tax when extracting funds, creating double taxation at both company and personal level.
On £9,000 retained in the company:
£1,710 (at 19%)
Remaining profits distributed as dividends:
Further tax payable
This can easily exceed the £600 Employers' NI cost
For most directors, taking a salary, even with the new Employers' NI costs, remains more tax-efficient than retaining profits in the company and extracting them as dividends.
Yes, and this is often overlooked by directors. The good news: the allowance has increased significantly from 2025/26.
The Employers' Allowance allows eligible businesses to reduce their Employers' NI bill by up to:
£5,000
Maximum reduction
£10,500
Maximum reduction (+110%)
If you qualify for the Employers' Allowance, your NI bill could be reduced to £0, making a salary much more tax-efficient again.
The old "standard" approach (low salary + dividends) needs reviewing. There is no longer a one-size-fits-all strategy.
£5,000/year instead of £9,100/year
15% instead of 13.8%
19% or 25% on company profits
8.75%, 33.75%, or 39.35%
Up to £10,500 from 2025/26
Balance for maximum efficiency
We'll help you find the optimal salary vs dividends structure for your situation.
Get Expert AdviceEmployers' NI now starts at £417/month
The rate has increased to 15%
Directors taking small salaries will now pay NI where they didn't before
Avoiding salary altogether can lead to higher overall tax
Employers' Allowance can eliminate NI, but not for sole directors
Careful salary vs dividend planning is essential
These changes may seem small on paper, but they have a real financial impact for directors and small business owners.
Getting your salary and dividends wrong could mean:
Now is the time to review your remuneration strategy.
At Taxwise Accountancy, we help directors structure their income in the most tax-efficient way, ensuring you stay compliant while minimising your tax bill.
Full adherence to HMRC regulations
Optimise your tax efficiency
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Taxwise Accountancy provides expert accounting and tax services for directors, small businesses, and contractors across the UK. Our qualified team of ICAEW and ACCA members helps businesses navigate complex tax legislation while maximising efficiency.