Director Salary Calculator

For most limited companies it is £12,570, the Primary Threshold and personal allowance: no income tax, no employee NI, a State Pension qualifying year, and full Corporation Tax relief on the salary. Employer NI of £1,135.50 applies unless Employment Allowance covers it; sole directors who cannot claim the allowance often weigh £12,570 against the cheaper £6,708.

Both reach the same annual total, only the timing differs. The standard annual method (reported as AN) recalculates NI on cumulative pay at every payslip, so nothing is due until the pay passes the annual thresholds: common for directors paid irregularly. The alternative method (AL) charges NI per period like a normal employee and reconciles on the last payslip of the year, which smooths cash flow but can produce a large adjustment, positive or negative, in month 12.

Company directors have an annual earnings period under CA44, whatever their pay frequency. NI is assessed on cumulative earnings for the whole tax year against annual thresholds, which stops directors avoiding NI by taking pay in a single month. Payroll can use the cumulative method or the alternative method with a year-end reconciliation; both land on the same total.

That is the Lower Earnings Limit for 2026-27 (£129 a week). At or above it, the year counts towards the State Pension even though no employee NI is actually paid. It is the cheapest qualifying year: the only cost is employer NI of £256.20 on the amount above the £5,000 Secondary Threshold.

Not if the director is the only employee paid above the £5,000 Secondary Threshold. Add a second employee earning above that threshold and the company can claim up to £10,500 off employer NI, which usually makes the £12,570 salary unambiguous.

Usually a low salary (£6,708 to £12,570) plus dividends. Salary earns the pension year and is deductible for Corporation Tax at 19% to 25%; dividends avoid NI entirely but are paid from post-tax profit. The right mix depends on profit level, other income and the dividend allowance, so model both sides before deciding.

Yes. The annual director NI basis and the exact percentage method for free pay mirror the Moonworkers payroll engine, the same engine behind the Moonworkers API, which is validated against HMRC test data. In-year payslips can differ month to month depending on the CA44 method chosen, but the year-end totals match.