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.
The secondary threshold (the point at which employers start paying NI) has reduced significantly:
2024/25
£758/month
(£9,100 per year)
2025/26
£417/month
(£5,000 per year)
This means employers now start paying NI much earlier.
Previous rate
13.8%
New rate from April 2025
15%
So not only are you paying NI sooner, but at a higher rate too.
This is a very common structure for owner-managed companies.
Salary: £750/month (£9,000/year)
Below threshold (£758/month)
No Employers' NI payable
New threshold: £417/month
NI applies on: £750 – £417 = £333/month
Employers' NI at 15%: £333 × 15% = £49.95/month
Annual cost: ~£600
A salary that previously had zero Employers' NI now creates a real annual cost.
Not necessarily—and in many cases, that would actually increase your tax bill.
You will pay:
Then dividend tax when extracting funds
This creates double taxation (company + personal level).
If £9,000 is not taken as salary:
Corporation tax at 19% = £1,710
Remaining profits distributed as dividends → further tax
This can easily exceed the £600 Employers' NI cost
Yes—and this is often overlooked.
It allows eligible businesses to reduce their Employers' NI bill by up to:
2024/25
£5,000
Previous allowance
From 2025/26
£10,500
Significantly increased!
If you qualify:
Your Employers' NI bill could be reduced to £0
Salary becomes much more tax-efficient again
The old "standard" approach (low salary + dividends) needs reviewing.
You now need to consider:
Lower NI threshold
Higher NI rate
Corporation tax impact
Dividend tax rates
Employers' Allowance eligibility
There is no longer a one-size-fits-all strategy.
Employers' 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.
ACCA, AAT & IFA qualified accountants
No obligation initial consultation
We respond within 24 hours
Learn the pros and cons of each business structure to make the right choice.
Calculate your take-home pay with our free salary and dividend tax calculator.
Answers to the most common questions about running a limited company.