Best Director Salary for 2026/27 (UK Limited Companies)

The best director salary for 2026/27 is usually one of three amounts: £5,000, £6,708 or £12,570 a year. Each sits on a threshold HMRC has set for the 2026 to 2027 tax year: where employer National Insurance starts, where the year counts towards your State Pension, and where Income Tax and employee National Insurance start. Most one-person companies pay one of these as salary and take the rest of their income as dividends. Whatever you choose, paying a salary means the company must first register as an employer.

The 2026/27 Thresholds That Matter

Threshold	Weekly	Monthly	Yearly
Secondary threshold (employer NI starts)	£96	£417	£5,000
Lower earnings limit (year counts for State Pension)	£129	£559	£6,708
Primary threshold (employee NI starts)	£242	£1,048	£12,570
Personal Allowance (Income Tax starts, standard tax code)	£242	£1,048	£12,570

Rates for 2026/27: employees pay 8% National Insurance on earnings between £12,570 and £50,270 and 2% above, and the employer pays 15% on earnings above £5,000. Figures from HMRC’s rates and thresholds for employers 2026 to 2027, for England and Northern Ireland. Scotland has different Income Tax bands.

Three Common Salary Levels Compared

For a company with one director and no other employees, so no Employment Allowance:

Yearly salary	Employer NI (15% above £5,000)	Your employee NI and Income Tax	Counts for State Pension?
£5,000	None	None	No: below the lower earnings limit, so the year does not count
£6,708	£256.20	None	Yes: treated as paid
£12,570	£1,135.50	None	Yes

Income Tax shows as none on the assumption that you have the standard tax code and no other income using your Personal Allowance.

£5,000: no National Insurance at all

Neither you nor the company pays National Insurance. But it is below the lower earnings limit, so the year does not count towards your State Pension unless you get credits or pay voluntary contributions.

£6,708: the lowest salary that protects your State Pension

GOV.UK says an employee earning from £129 to £242 a week from one job has contributions treated as paid, which protects their National Insurance record. At £6,708 the company pays £256.20 of employer National Insurance, and you pay nothing. You need 10 qualifying years to get any new State Pension.

£12,570: use the whole Personal Allowance as salary

You pay no Income Tax or employee National Insurance at this level, and the year counts. The company pays £1,135.50 of employer National Insurance. Salary and employer National Insurance are business costs, so they reduce the company’s Corporation Tax (19% on profits of £50,000 or less, 25% above £250,000, with marginal relief in between). Whether the Corporation Tax saving outweighs the employer National Insurance depends on your company’s profits.

Can a One-Person Company Claim Employment Allowance?

No. Employment Allowance cuts employer National Insurance by up to £10,500 in 2026/27, but if your company has only one director, that director must not be the only employee liable for employer National Insurance. Once you employ someone else, or there are two directors on the payroll, the company may qualify, and a higher salary can become cheaper.

Salary and Dividends Together

Most one-person companies pay a small salary and take the rest of the profit as dividends. Dividends are paid from profits after Corporation Tax, and every individual has a £500 dividend allowance before dividend tax applies. Because the best mix depends on your profits, your other income and where you live, speak to an accountant before you set your salary. This guide is general information, not tax advice.

Common Mistakes When Setting a Director Salary

Paying a salary before registering for PAYE. The company must register as an employer before the first payday. Paying first and registering later means late reports to HMRC.
Choosing £12,570 without checking Employment Allowance. A sole director cannot claim it, so the company pays employer National Insurance on everything above £5,000.
Paying less than £6,708 without realising the State Pension cost. A year below the lower earnings limit does not count unless you fill the gap another way.
Forgetting other income. If you have another job or pension, part of your Personal Allowance may already be used, and the numbers in this guide change.
Taking money out without paperwork. Money you take that is neither salary through payroll nor a properly declared dividend can end up as a director’s loan, with its own tax rules.

Paying Yourself From Abroad

Directors who live outside the UK can still be paid a salary by a UK company through UK payroll. Whether UK tax and National Insurance apply, and whether you pay tax in your country of residence too, depends on where you live and work and on any tax treaty between the two countries. Take advice in both countries before you set a salary.

Before You Pay Yourself: Register for PAYE

Register the company as an employer with HMRC before the first payday, and not more than 2 months before it. This applies even if you are the only director and the only person paid.
Set up payroll software and report each payment to HMRC on or before payday.
Pay HMRC any employer National Insurance due.

CorpAssist’s PAYE registration service registers your company as an employer for £59.99. We do not run payroll; an accountant or payroll software does that. New to the role? Read what a company director does, or compare sole trader vs limited company.

Register as an Employer Before Your First Payday

Paying yourself a salary starts with a PAYE registration. CorpAssist handles it:

Employer (PAYE) registration submitted to HMRC for £59.99; HMRC does not charge
Covers directors paying themselves a salary and companies hiring staff
A person checks your answers before submission
Works for directors living outside the UK

Start — £59.99 What is included

Frequently Asked Questions

What is the best director salary for 2026/27?

For a one-person limited company, most directors choose a salary at one of three levels: £5,000 (no National Insurance at all), £6,708 (the lowest level that counts towards the State Pension) or £12,570 (the Personal Allowance and employee National Insurance threshold). Which is best depends on your profits and other income, so check with an accountant.

Do I need to register for PAYE to pay myself a salary?

Yes. HMRC says you must register as an employer even if you are only employing yourself as the only director of a limited company, before the first payday and not more than 2 months before it. CorpAssist submits the registration for £59.99.

Can a sole director claim Employment Allowance?

No. If your company has only one director, they must not be the only employee paid above the secondary threshold. Employment Allowance (£10,500 for 2026/27) reduces employer National Insurance only for companies that also employ someone else.

What National Insurance does a director pay in 2026/27?

Employees, including directors, pay 8% on earnings between £12,570 and £50,270 and 2% above that. The company pays employer National Insurance of 15% on earnings above £5,000.

Is a salary better than dividends?

Salary and the employer National Insurance on it are business costs that reduce the company’s Corporation Tax, while dividends are paid from profits after Corporation Tax. Most directors take a small salary and the rest as dividends. The right split depends on your profits and other income, so ask an accountant.

Does a director’s salary need to be paid through payroll?

Yes. The company reports each payment to HMRC through payroll software on or before payday, even when no tax or National Insurance is due.

Thresholds and rates checked on GOV.UK on 31 October 2026 for the 2026 to 2027 tax year. CorpAssist does not provide tax advice, accounting or payroll.