How do directors pay national insurance?
Answered 11 March 2026
How Directors Pay National Insurance
What the law says
Directors are treated as employed earners for NIC purposes. A directorship is an "office" and therefore falls within the definition of "employed earner" under section 2(1)(a) of the Social Security Contributions and Benefits Act 1992. This means payments to a director for acting as a director are liable to Class 1 National Insurance contributions (both primary — the director's share — and secondary — the employer/company's share).
The key distinction from ordinary employees is the earnings period. Under regulation 8 of the Social Security (Contributions) Regulations 2001 (SSCR 2001), a director's earnings period is normally the whole tax year (6 April to 5 April), known as the Annual Earnings Period (AEP). This prevents a director from receiving all their remuneration in a single week and avoiding most of their Class 1 primary liability through the weekly/monthly Upper Earnings Limit (UEL).
Pro-rata earnings period: A director appointed during a tax year has a pro-rata earnings period — the number of weeks remaining in the tax year from (and including) the week of appointment, based on 52 weeks. A director who is in post at the start of a tax year, or who ceases to be a director during the year, has a full annual earnings period for that year.
The company (as secondary contributor) must pay over Class 1 NICs to HMRC within 14 days of the end of the tax month (or 17 days if paying electronically).
Dividends paid to a director as a shareholder are not earnings and are therefore not liable to Class 1 NICs.
HMRC Guidance / Practice
There are two methods for calculating and paying directors' NICs in practice:
1. Standard Method (Annual Earnings Period) NICs are calculated using the annual (or pro-rata) earnings period for every payment made during the year. The annual LEL and UEL are calculated by multiplying the weekly figures by 52. The intervals between payments are irrelevant.
2. Alternative Method Employers may choose to treat the director's earnings in the same way as other employees — using weekly or monthly NIC tables throughout the year — provided the director is receiving regular payments. However, at the end of the tax year, the employer must carry out an end-of-year reconciliation for the whole annual earnings period. Any difference in NICs must be recorded at month 12 and the final payment to HMRC adjusted accordingly.
Under either method, the company and director may pay NICs "on account" throughout the year using the same earnings periods as other employees, but the secondary contributor (the company) must use the annual or pro-rata earnings period at year-end to calculate the correct final amount due.
Where rates change mid-year (as occurred in 2022–23 and 2023–24), a blended rate must be applied to directors because of their annual earnings period. For example, in 2023–24 the blended main primary rate was 11.5%.
Exceptions: There are limited exceptions where Class 1 NICs do not apply to director payments — for example, certain payments to professional people and nominee directors (under regulation 27 SSCR 2001), and an administrative concession for non-resident directors who only attend board meetings in Great Britain and Northern Ireland.
Citation sources
Under this method employers can choose to treat the director's earnings the same way as other employees, by using weekly or monthly tables throughout the year. To be able to use this method the director must be receiving regular payments from the employer. At the end of the tax year the employer must do an end of year calculation for the whole annual earnings period. In order to calculate the correct NICs for the annual earnings period, the NICs paid must be re-assessed. This re-assessment must
A director and the employing company may pay “on account”of any earnings-related contribution that may become payable, using the same earnings periods as for other employed earners. However, the secondary contributor must use the annual or pro-rata earnings period at the end of the tax year to calculate the correct amount of Class 1 contributions due.
The PAYE and National Insurance legislation require an employer to pay over to HMRC the PAYE and National Insurance contributions (NICs) due on the earnings of an employee. A company has a statutory obligation to pay the PAYE and Class 1 (NICs) to HMRC within 14 days of the end of the month in which the deductions were made (or 17 days if by electronic method) in respect of employment income paid to its employees. If the correct amount of NICs are not paid then section 121C of the SSAA 1992 prov
A director within regulation 8 SSCR 2001 has an annual earnings period (AEP). Whether an annual or pro-rata, see NIM12022, earnings period applies, you must always use it for each payment of earnings. The intervals between payments are irrelevant. The annual Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL) are calculated by multiplying the weekly LEL and UEL by 52. There are alternative arrangements for the assessment and payment of NICs for company directors, see NIM12026.
The main rate of primary Class 1 NICs that applies to a payment of earnings in the 2023 to 2024 tax year to employees depends on the date that the payment is made. However, because directors have an annual earnings period (or pro-rata as appropriate) then an average blended rate needs to be applied, as set out in the legislation. The blended rate is calculated as 275 days at the rate which applied at the start of the tax year and 91 days at the rate which applied at the end of the tax year, for
Directors receive dividends as shareholders in the company and not in their capacity as directors. Dividends are therefore not earnings for the purposes of National Insurance Contributions. If a company pays an unlawful dividend to its directors, or any other shareholder, the money is returnable to the company (Section 277 Companies Act 1985) and is not re-classified as earnings. If the company is possibly an intermediary within the ‘IR35’ legislation, see ESM3500 onwards.
Directors appointed during the tax year have a pro-rata earnings period. Under regulation 8(2), the pro-rata earnings period is the number of weeks left in the tax year from and including the week of appointment. Under regulation 8(3), a person who is a director at the start of a tax year or ceases to be a director during the tax year has an annual earnings period for that tax year. The annual earnings period also remains if the company goes into liquidation. A tax year starts on 6 April and end
The legislation on employed earners and Class 1 contributions applies to directors unless otherwise stated or specific administrative concessions apply. Payments to a director are liable for Class 1 contributions because a directorship is an office (ESM2501 for offices generally and ESM4040 for directors) and therefore within the definition of “employed earner” in section 2(1)(a) of the Social Security Contributions and Benefits Act 1992. Normally payments to a director, for acting as a director