Why directors run payroll
Directors are classed as employees, so a salary paid by your limited company goes through PAYE. HMRC says you must register as an employer even if you are only employing yourself, for example as the only director of a limited company.
Your company also pays employer National Insurance on directors' salaries. HMRC says this applies even if you are the director of your own company and the only employee.
Each time you pay yourself, report it to HMRC on or before payday with a Full Payment Submission (FPS), as you would for any employee.
The 2026/27 thresholds
Employer National Insurance is 15% on pay above the secondary threshold. Employee National Insurance is 8% on pay between the primary threshold and the upper earnings limit, and 2% above it.
You pay no employee National Insurance on pay between the lower earnings limit and the primary threshold.
As a worked example, a director paid £12,570 across 2026/27 pays no employee National Insurance. The company pays 15% on the £7,570 above the secondary threshold, which is £1,135.50, before any Employment Allowance. If pay stays at £5,000 or below, the company pays no employer National Insurance.
The two thresholds start at different points, so between £5,000 and £12,570 the company pays National Insurance while you do not. These are the annual Class 1 figures for 6 April 2026 to 5 April 2027:
- Lower earnings limit: £6,708
- Secondary threshold, where employer National Insurance starts: £5,000
- Primary threshold, where employee National Insurance starts: £12,570
- Upper earnings limit: £50,270
How the annual earnings period works
For directors, National Insurance is worked out on annual earnings, not on what you earn in each pay period. That is why a director's National Insurance can be calculated differently from an employee's in the same company.
There are two methods. The standard annual method is common for directors paid irregularly: each time you are paid, National Insurance is worked out on your total pay for the tax year so far, less the employee National Insurance already paid that year.
The alternative method is common for directors paid regularly. National Insurance is worked out on each payment, and any extra employee National Insurance is worked out at the end of the tax year and deducted from the final payment.
A director in post at the start of the tax year has an annual earnings period for that tax year. If you are appointed part way through, a pro rata period applies, counted in weeks from and including the week of your appointment.
Employment Allowance and the single director rule
Employment Allowance reduces an employer's annual National Insurance bill by up to £10,500 for 2026/27. It applies against your employer Class 1 National Insurance, and you can still claim if your bill is less than £10,500.
If your company has only one director, that director must not be the only employee liable for secondary Class 1 National Insurance.
If another employee or director is also paid above the secondary threshold, which is £5,000 a year for 2026/27, the company can be eligible for the whole tax year. Check the rules before you rely on the allowance in your budget.
What Director's Payroll covers
PayNinja's Director's Payroll is £12 a month and covers your first 2 directors. If you also take on staff, Employee Payroll is £24 a month and covers your first 4 employees.
Payroll is an add-on to PayNinja's accountancy packages for bookkeeping, VAT returns, accounts and tax returns, which are quoted individually.
How much salary to take depends on your profits and other income, so it is worth talking through before you set it.