UK Employer NIC Changes 2026: How the April Rate Rise Affects Your Director Salary

On 6 April 2026, two employer National Insurance changes hit at the same time: the rate went up from 13.8% to 15%, and the secondary threshold — the point at which employer NIC starts — fell from £9,100 to £5,000. Together they significantly increased the NIC cost of any director salary above £5,000. If you have not reviewed your pay structure since April, here is what changed and what to do about it.

The Two Changes Explained

The April 2026 employer NIC changes came from the Autumn Budget 2025. HMRC implemented them together, and the combined effect is larger than either change alone.

Change 1: Rate from 13.8% to 15%

Every pound of salary above the secondary threshold now costs the company 15p in NIC rather than 13.8p — a 8.7% increase in the NIC rate itself.

Change 2: Secondary threshold from £9,100 to £5,000

This is the bigger impact for directors. The threshold drop means employer NIC now applies to an extra £4,100 of salary that was previously free of NIC. At 15%, that extra band costs £615 per year before you even account for the rate increase.

The two changes stack: you pay a higher rate on a wider base.

Cost Impact at Every Common Salary Level

Annual salary	Employer NIC 2025/26	Employer NIC 2026/27	Increase
£5,000	£0	£0	—
£8,000	£0	£450	+£450
£9,100	£0	£615	+£615
£12,570	£479	£1,135.50	+£656.50
£15,000	£813	£1,500	+£687
£20,000	£1,503	£2,250	+£747
£30,000	£2,883	£3,750	+£867

At the most common director salary of £12,570, the extra annual cost is £656.50 — a 137% increase in employer NIC for an unchanged salary.

New Optimal Salary Strategies for 2026/27

There is no single right answer — the optimal salary depends on your corporation tax rate, whether you can claim the UK personal allowance, and whether you have other employees. Here are the three strategies most directors use.

Strategy A: £5,000 salary (zero employer NIC)

Paying exactly £5,000 avoids employer NIC entirely. The company saves on NIC but gives up some corporation tax relief — a salary is deductible against profit, whereas dividends are not.

• Employer NIC: £0
• Corporation tax saving on salary (at 19%): £950
• Net cost vs taking £5,000 as dividend: company saves £950 CT, pays £0 NIC

Strategy B: £12,570 salary (full personal allowance)

If you can claim the UK personal allowance, a £12,570 salary is still income-tax-free for you personally. The company pays employer NIC of £1,135.50 but gets corporation tax relief on the full £12,570 salary.

• CT saving at 19%: £2,388  |  at 25%: £3,142
• Employer NIC cost: £1,135.50
• Net saving vs all-dividend at 19% CT: £1,252  |  at 25% CT: £2,006

Strategy B still wins over Strategy A for most companies paying CT at 19% or above. The extra £7,570 salary saves more in CT than it costs in NIC.

Strategy C: £8,840 salary (employee NIC floor, pre-2026 style)

Some advisers previously recommended £8,840 to keep the director below the lower earnings limit and avoid employee NIC while staying within the employer NIC-free band. With the threshold now at £5,000, any salary above £5,000 triggers employer NIC. This threshold has lost its strategic relevance — you are now better off at either £5,000 or £12,570 depending on your situation.

Non-Resident Director Considerations

Employer NIC is a company liability — it applies regardless of where you personally are tax-resident. If your UK company pays you any salary above £5,000, the company owes employer NIC at 15% on the excess. Residency does not change that.

Where residency does matter is income tax on the salary itself. Many non-resident directors either cannot claim the UK personal allowance or choose not to register for UK self-assessment. In that case:

• A salary above £0 triggers UK income tax on the gross amount (typically collected via PAYE)
• A salary at exactly £5,000 costs the company zero employer NIC and triggers minimal income tax (PAYE on £5,000 at 20% = £1,000, though a double-tax treaty may reduce or eliminate this)
• Taking profit as dividends instead avoids both employer NIC and UK income tax for non-UK-resident shareholders (most treaties exempt UK dividends from UK WHT)

For non-resident directors, the April 2026 changes tip the salary vs dividend calculation further toward dividends or toward a very low £5,000 salary. See our Director Salary vs Dividends guide for the full comparison.

Employment Allowance: Who Can Use It

The Employment Allowance increased significantly in April 2026 — from £5,000 to £10,500. This allows eligible companies to offset up to £10,500 of their annual employer NIC bill against the allowance.

However, sole-director companies remain excluded. If the only employee on your payroll is a director, you cannot claim Employment Allowance. This has been the rule since 2016 and has not changed.

You can claim Employment Allowance if:

• You employ at least one person who is not a director, OR
• You are a director and there is at least one other director or employee on the payroll

If you hire even a part-time employee, the Employment Allowance could offset your entire employer NIC bill — at £1,135.50 for a £12,570 director salary, you would have substantial headroom remaining.

Changing Your Salary Mid-Year

The 2026/27 tax year runs 6 April 2026 to 5 April 2027. If you have not yet changed your director salary since April, you can still do so — payroll changes are not locked in for the year. You will need:

1. A board resolution documenting the new salary and effective date
2. An updated employment contract or service agreement if one exists
3. A corrected payroll submission to HMRC via RTI (Real Time Information) for the period from the change date

Note that HMRC will have already processed earlier months at the old salary level. Overpaid employer NIC can be reclaimed via your payroll software or by contacting HMRC directly. You cannot retroactively apply the new salary to months already processed.

Further reading: Director Pay for Non-Residents: Salary vs Dividends Guide.

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