With director's NI, there are two ways you can calculate their NI in your software. The options are either Annual basis, or Pro rata basis. To find out more about these options, visit the processing directors article.
Examples These examples use the 2025/2026 NI rates and earnings bands. In these examples, the director uses the annual basis, they earn £6,000 each month, and are on NI category A. Click a month below to view the breakdown of the calculation for that period. ▼ Month 1 | | Employee's Pay | Employee NI contribution rate | Employee NI contributions | Employer NI contribution rate | Employer NI contributions | | Earnings up to the secondary threshold (ST) | Up to £5,000.00 = £5,000.00 | 0% | £5,000.00 @ 0% = £0 | 0% | £5,000.00 @ 0% = £0 | | Earnings between the ST and Freeport upper secondary threshold (FUST) | From £5,000.01 to £25,000.00 = £1,000 | 0% | £1,000.00 @ 0% = £0 | 15.0% | £1,000.00 @ 15.0% = £150.00 | | Earnings between the directors primary threshold (DPT) and upper earnings limit (UEL) | From £12,570.01 to £50,270.00 = £0 | 8.0% | £0 @ 8.0% = £0 | N/A | £0 @ 0% = £0 | | Earnings between the FUST and UEL | £25,000 to £50,270 = £0 | N/A | £0 @ 0% = £0 | 15.0% | £0 @ 15.0% = £0 | | Earnings above the UEL | Above £50,270.01 = £0 | 2% | £0 @ 2% = £0 | 15.0% | £0 @ 15.0% = £0 | | Total NI due for the period | | | £0.00 | | £150.00 | As this calculation method applies the annual thresholds from the start of the year, the employee and employer have little NI liability in month 1. Due to the secondary threshold reducing to £5,000 from 6 April 2025, there’s £150.00 of employer NI liability. The director's earnings are below the threshold from which employee liability is due.
▼ Month 2 The director earns another £6,000, taking their total for the year to £12,000. | | Employee's Pay | Employee NI contribution rate | Employee NI contributions | Employer NI contribution rate | Employer NI contributions | | Earnings up to the secondary threshold (ST) | Up to £5,000.00 = £5,000 | 0% | £5,000.00 @ 0% = £0 | 0% | £5,000.00 @ 0% = £0 | | Earnings between the ST and Freeport upper secondary threshold (FUST) | From £5,000.01 to £25,000.00 = £7,000.00 | 0% | £7,000.00 @ 0% = £0 | 15.0% | £7,000.00 @ 15.0% = £1,050.00 | | Earnings between the directors primary threshold (DPT) and upper earnings limit (UEL) | From £12,570.01 to £50,270.00 = £0 | 8.0% | £0 @ 8.0% = £0 | N/A | £0 @ 0% = £0 | | Earnings between the FUST and UEL | £25,000 to £50,270 = £0 | N/A | £0 @ 0% = £0 | 15.0% | £0 @ 15.0% = £0 | | Earnings above the UEL | Above £50,270.01 = £0 | 2% | £0 @ 2% = £0 | 15.0% | £0 @ 15.0% = £0 | | Total NI due for the tax year | | | £0 | | £1,050.00 | | Less NI paid so far | | | £0 | | £150.00 | | Total due in month 2 | | | £0 | | £900.00 | The employer has £900.00 NI liability in month 2, and the director has no employee NI liability. This is because their earnings are still below the threshold of £12,570.01.
▼ Month 3 The director's earnings so far this year are now £18,000. | | Employee's Pay | Employee NI contribution rate | Employee NI contributions | Employer NI contribution rate | Employer NI contributions | | Earnings up to the secondary threshold (ST) | Up to £5,000.00 = £5000.00 | 0% | £5,000.00 @ 0% = £0 | 0% | £5,000.00 @ 0% = £0 | | Earnings between the ST and Freeport upper secondary threshold (FUST) | From £5,000.01 to £25,000.00 = £13,000.00 | 0% | £13,000.00 @ 0% = £0 | 15.0% | £13,000.00 @ 15.0% = £1,950.00 | | Earnings between the directors primary threshold (DPT) and upper earnings limit (UEL) | From £12,570.01 to £50,270.00 = £5,430.00 | 8.0% | £5,430.00 @ 8.0% = £434.40 | N/A | £5,430.00 @ 0% = £0 | | Earnings between the FUST and UEL | £25,000 to £50,270 = £0 | N/A | £0 @ 0% = £0 | 15.0% | £0 @ 15.0% = £0 | | Earnings above the UEL | Above £50,270.01 = £0 | 2% | £0 @ 2% = £0 | 15.0% | £0 @ 15.0% = £0 | | Total NI due for the tax year | | | £434.40 | | £1,950.00 | | Less NI paid so far | | | -£0 | | -£1050.00 | | Total due in month 3 | | | £434.40 | | £900.00 | The director's earnings now exceed the threshold to pay employee NI. As a result, NI liability jumps up for both employee and employer. Employee liability is £434.60 for the period. The employers NI remains at £900.00. After you calculate the NI due for the year, deduct any NI that the employee has already paid. This confirms the amount due in the period you're processing.
▼ Month 12 As this is the final month of the tax year, the director's earnings for the full year apply to the calculation. This calculation also applies to pro rata basis directors in the final pay period of the tax year. Based on £6,000 per month, their total earnings in a year add up to £72,000. | | Employee's Pay | Employee NI contribution rate | Employee NI contributions | Employer NI contribution rate | Employer NI contributions | | Earnings up to the secondary threshold (ST) | Up to £5,000.00 = £5,000.00 | 0% | £5,000.00 @ 0% = £0 | 0% | £5,000.00 @ 0% = £0 | | Earnings between the ST and Freeport upper secondary threshold (FUST) | From £5,000.01 to £25,000.00 = £20,000.00 | 0% | £20,000.00 @ 0% = £0 | 15.0% | £20,000 @ 15.0% = £3,000.00 | | Earnings between the directors primary threshold (DPT) and upper earnings limit (UEL) | From £12,570.01 to £50,270.00 = £37,700.00 | 8.0% | £37,700.00 @ 8.0% = £3,016.00 | N/A | £37,700.01 @ 0% = £0 | | Earnings between the FUST and UEL | £25,000.00 to £50,270.00 = £25,270.00 | N/A | £25,270.00 @ 0% = £0 | 15.0% | £25,270.00 @ 15.0% = £3,790.50 | | Earnings above the UEL | Above £50,270.00 = £21,730.00 | 2% | £21,730.00 @ 2% = £434.60 | 15.0% | £21,730.00 @ 15.0% = £3,259.50 | | Total NI due for the tax year | | | £3,450.60 | | £10,050.00 | | Less NI paid so far | | | -£3,330.60 | | -£9,150.00 | | Total due in month 12 | | | £120.00 | | £900.00 | The total employee NI due for the tax year is £3,450.60 for the director and £10,050.00 for the employer. By comparison, the employee NI is lower than month 3, as the director's earnings have passed the UEL. NI calculates at 2% from this point. The NI due in month 12 is: - Employee (The Director) = £120.00
- Employer = £900.00
If the director's pay varies each month, their NI due in month 12 will likely be different from what they paid during the year. For example, this might happen if they've had a large bonus payment in one month, then smaller amounts for the rest of the year.
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