Do very small companies need to pay employers’ National Insurance?
It’s easy to think that employers’ National Insurance (NI) is something that only applies to bigger businesses with lots of staff on the payroll. But if you’re a director paying yourself a salary through your own company, that company is legally an employer too. Any company paying a salary above a certain amount owes employers’ NI on it.
If you’re a Maslins client, we factor this into your annual salary and dividend planning, working out the most tax-efficient way for you to be paid. Here, we walk through employers’ NI, how it works, and what it could mean for your own pay.
When does your limited company start paying NI?
Your company becomes liable for employers’ NI once a salary goes above the secondary threshold, currently £5,000. That’s lower than it used to be. Before April 2025, the threshold was £9,100, so lots of companies who never used to pay employers’ NI now do.
This threshold is different from the one that affects you personally. You start paying employee NI once your salary passes £12,570 a year, this is known as the primary threshold.
Because these two thresholds now sit so far apart, the true cost of a salary catches people out at budgeting time. Your company will owe employers’ NI on a salary well before you owe any NI personally.
Employer’s NI is charged at 15% on all earnings above the secondary threshold, with no upper limit.
Directors are employees too, but calculations can differ
For NI purposes, directors count as employees. The one real difference is timing. Most employees have their NI worked out pay-period by pay-period, but directors have what’s called an ‘annual earnings period’, so NI is calculated on cumulative earnings across the whole tax year rather than reset each month. This is the default, and it’s what payroll software will apply unless you tell it otherwise. It’s also why a director’s NI can look lumpy, with nothing deducted for the first few months and then a chunk appearing once cumulative pay crosses the threshold.
There is an optional alternative method that spreads the NI evenly across the year and then reconciles everything in the final pay period. Either way the total for the year comes out the same, so it’s a question of cash flow rather than cost.
NI on Benefits in Kind
Employers’ NI doesn’t stop at your salary. If your company provides any Benefits in Kind, it also pays a separate NI charge on those, called Class 1A, at the same 15% rate. This is reported through the P11D(b) form (HMRC’s form for declaring the NI due on benefits) and settled separately from payroll, unless the benefits are payrolled, in which case the NI comes through payroll like everything else.
How does Employment Allowance work?
Employment Allowance can reduce your employer NI bill by up to £10,500 a year, which for a lot of small companies would cover the liability entirely. But eligibility is restricted. A company cannot claim if it has only one director and that director is the only person paid above the secondary threshold. Companies with an additional employee or a second director paid above the threshold will generally qualify. Also, if you have two or more companies under common control, only one of them can claim the allowance across the group. It’s up to you which one.
For example:
A director paying themselves our recommended salary. As a sole director with no one else on the payroll above the threshold, that generates an employer NI bill of around £1,135, with no Employment Allowance available. Add a second director on the same salary, and the combined NI bill roughly doubles to around £2,270, but because the company now qualifies for the Employment Allowance, worth up to £10,500 a year, there is no employer’s NI to pay.
How do you pay employer NI?
NI on salaries goes through payroll, so it’s collected in the same way as everything else you already report.
Breakdown of Employer’s NI and Employee’s NI
| Type of NI | Name | Amount | What it means |
|---|---|---|---|
| Employer’s NI | Secondary threshold | £5,000 a year | Your company starts owing employer NI once salary passes this. |
| Employer’s NI | Employer NI rate | 15%, no upper limit | Charged on everything above the secondary threshold, with no ceiling. |
| Employer’s NI | Employment Allowance | £10,500 | Can cover your employer NI bill entirely, but not if you’re a sole director with nobody else paid above the threshold. |
| Employee’s NI | Lower Earnings Limit | £6,708 a year | Paying yourself at this level still counts as a qualifying year for the state pension, without triggering NI. |
| Employee’s NI | Primary threshold | £12,570 a year | You personally start paying NI once your own salary passes this threshold. |
Planning for tax efficiency
You should consider NI in the bigger picture of your tax planning. Dividends, unlike salary, attract no NI at all, for either you or the company. That said, the gap narrowed from 6 April 2026, when the ordinary and upper dividend tax rates each rose by two percentage points, to 10.75% and 35.75%, with the additional rate unchanged at 39.35%.
Salary and employers’ NI are also deductible for Corporation Tax, whereas dividends are not, which takes some of the sting out of the NI cost. The right balance doesn’t come down to NI alone, and there is a range of other factors to weigh up. This is exactly where we can help. Every year, we advise clients on the most tax-efficient way to take your salary and dividends.
Salary sacrifice, such as pension contributions, can reduce NI for both employer and employee, as the sacrificed amount falls outside NI entirely. This is one of the few remaining ways to reduce NI cost without changing your take-home pay. Bear in mind that from 6 April 2029 the NI exemption on salary-sacrificed pension contributions will be capped at £2,000 a year, so anything above that will attract NI for both employer and employee.
Where you set a director’s salary also affects your State Pension record, and for 2026/27 there are three levels worth knowing about:
- A salary of £5,000 sits right on the secondary threshold and costs the company nothing in employers’ NI, but it falls below the Lower Earnings Limit of £6,708, so the year will not count towards your State Pension.
- A salary of £6,708 preserves that qualifying year for around £256 of employers’ NI.
- A salary of £12,564 preserves it too, costs around £1,135 in employers’ NI, and gives the company more to deduct against Corporation Tax.
None of these three trigger any personal NI, because employee NI only starts above £12,570.
Employers’ NI is rarely the biggest number in your tax bill, but it is one of the easiest to get wrong, and the cost of getting the salary level right is usually nothing at all. Got a question on employers’ NI, or want us to run the numbers for you? Get in touch and talk to our team.
