Definition
Employer National Insurance (secondary Class 1 National Insurance contributions) is the amount a company pays HMRC on top of the salaries it pays employees and directors. For 2026/27 the rate is 15% on each person’s earnings above the secondary threshold of £5,000 a year (£417 a month). It is a cost to the company and is not deducted from the employee’s pay.
Effect on director pay
A director paid £12,570 in 2026/27 creates employer National Insurance of £1,135.50: 15% of the £7,570 above the threshold. That extra cost is one reason directors weigh salary against dividends when setting their pay. See what 15% employer NI means for director pay for salary levels compared.
How it is paid and reduced
The company works out employer National Insurance in its payroll software, reports it through Real Time Information and pays it with PAYE. Employment Allowance can cancel up to £10,500 a year, but not where a director is the only employee paid above £5,000. Taxable benefits, such as a company car, carry a separate 15% Class 1A charge reported on form P11D(b).
SmartFiling’s payroll service handles these calculations, including director-only payroll.
Related questions
- What is the most tax-efficient director salary for 2026/27? For most single-director companies £12,570, even though it creates some employer National Insurance.
- What are the ways to take money out of a limited company? Salary, dividends, a director's loan and employer pension contributions, compared in four ways to take money out of a limited company.
Related terms
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Employment Allowance
Employment Allowance lets eligible employers cut their employer Class 1 National Insurance bill by up to £10,500 each tax year…
Read definition -
PAYE (Pay As You Earn)
PAYE (Pay As You Earn) is HM Revenue and Customs' (HMRC) system for collecting Income Tax and National Insurance from employment income…
Read definition -
Real Time Information
Real Time Information (RTI) is the way employers report payroll to HMRC under PAYE.
Read definition
