The optimal director salary for 2026/27
The recommended director salary depends on if your company qualifies for Employment Allowance
The recommended director salary depends on whether your company qualifies for the Employment Allowance.
£6,708 per year (director-only companies)
A salary of £6,708 (the Lower Earnings Limit) minimises the National Insurance contributions (NIC) that the company pays, and means you will pay no NIC, whilst ensuring that you build up NIC qualifying years towards your state pension. No Income Tax applies because it is below the Personal Allowance. This is the recommended level for sole director companies that do not qualify for the Employment Allowance (which requires at least one non-director employee).
Paying a salary of £5,000 (the secondary NIC threshold) means neither you nor the company would pay NIC. However, you would not meet the minimum threshold needed to gain an NIC qualifying year for your state pension which could be more beneficial in the long run.
£12,570 per year (if Employment Allowance available)
Where the company has a non-director employee and qualifies for the Employment Allowance (up to £10,500 towards employer NIC), a salary of £12,570 is optimal. No Income Tax and no employee NIC. The small employer NIC arising is fully offset by the allowance.
💡 Good to know: Even a small salary above the Lower Earnings Limit of £6,708 per year preserves a National Insurance qualifying year for your state pension. Never take a zero salary. The recommended levels of £6,708 or £12,570 are set above the Lower Earnings Limit to ensure this.
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