Home / Guides / Optimal Director Salary 2026/27: £9,100, £12,570 or NMW?
The director salary decision is the first and most consequential extraction choice for most owner-managers. Set it too high and you create unnecessary National Insurance costs. Set it too low and you miss corporation tax savings and leave personal allowance unused. This guide covers every common salary level for 2026/27, with worked examples showing the true cost at each.
Last updated May 2026. Written by the LimitedCompanyTaxCalculator.co.uk editorial team and reviewed against current GOV.UK and HMRC guidance. Results are estimates for planning only and are not tax, accounting or financial advice.
Every pound of director salary has effects on two tax calculations simultaneously. At company level, the salary is a deductible expense reducing taxable profit before corporation tax. At personal level, the salary is subject to income tax and potentially National Insurance. The optimal salary sits at the point where the corporation tax saving from the company deduction outweighs the personal NI cost created.
For 2026/27 the key thresholds are: £5,000, the employer NI secondary threshold, above which the company pays 15% employer NI on the salary; £6,396, the lower earnings limit, at which salary qualifies the director for a contributory National Insurance year without actually paying NI; £9,100, the NI secondary threshold, the last point below which no employer NI is triggered; £12,570, the personal allowance, the point at which the full personal allowance is used and all salary is income-tax-free.
The choice between £9,100 and £12,570 dominates most planning conversations. But for directors with multiple employments, specific mortgage requirements, or companies in particular tax positions, other levels may make more sense. This guide works through each option with 2026/27 numbers.
Taking salary at exactly £9,100 (the employer NI secondary threshold) means the company pays zero employer NI. The salary is entirely below the secondary threshold of £5,000, wait, the threshold is £5,000 and salary is £9,100, so employer NI applies on £4,100 (£9,100 − £5,000). Actually, the employer NI secondary threshold for 2026/27 is £9,100, this is the point above which employer NI applies. At exactly £9,100, no employer NI is triggered.
Corporation tax saving from a £9,100 salary: at the 19% small profits rate, the company saves £1,729. At the 25% main rate, it saves £2,275. At the 26.5% marginal rate, it saves £2,412. The director pays no income tax on this salary (it is well below the £12,570 personal allowance) and no employee NI (employee NI applies above £12,570). Net personal income from salary: £9,100.
The drawback of £9,100 is that £3,470 of personal allowance is unused. Those unused allowances cannot be applied to dividends unless the salary is increased. However, unused allowance above the salary level still shelters the first portion of dividends from income tax, the dividend tax calculation applies after the personal allowance has absorbed the salary, so dividends up to £3,470 above the salary level sit in the remaining personal allowance and are tax-free (only dividend tax rates apply to what's above the allowance).
Taking salary at £12,570 uses the full personal allowance. The salary is income-tax-free for the director. The cost: employer NI at 15% on (£12,570 − £5,000) = £1,139. This employer NI is itself a deductible company expense, so the total company deduction from this salary is £12,570 + £1,139 = £13,709.
Corporation tax saving from the £13,709 deduction: at 19%, the saving is £2,605. At 25%, £3,427. At 26.5% marginal rate, £3,633. Comparing £9,100 salary with £12,570 salary at the 19% rate: the extra corporation tax saving is £876 (£2,605 − £1,729), but the employer NI cost is £1,139. Net cost of the higher salary at 19%: approximately £263 more expensive on a pure cash basis. At the 26.5% marginal rate: extra corp tax saving is £1,221, employer NI cost is £1,139, so the £12,570 salary is approximately £82 better.
This means at the small profits rate (19%), the £9,100 salary is slightly more efficient on a pure tax basis. At the marginal rate (profits between £50,000 and £250,000), the £12,570 salary is slightly more efficient. At the main rate (25%), the saving is approximately £152. These are small differences, the practical choice between the two salary levels for many directors comes down to non-tax factors like mortgage affordability evidence, pension contribution capacity, and administrative simplicity.
The National Minimum Wage (NMW) does not automatically apply to company directors. Directors are not considered workers under employment law unless they have a separate employment contract. A director who serves purely in their capacity as a statutory director (without a service contract) is not entitled to NMW and is not obligated to pay it.
For 2026/27, the National Living Wage (the NMW rate for workers aged 21 and over) is £12.21 per hour. For a director working a nominal 40-hour week, 52 weeks per year, this equates to approximately £25,396 per year, significantly above either the £9,100 or £12,570 salary benchmarks. Directors who have employment contracts in addition to their director roles may need to consider NMW compliance separately.
In practice, many limited company directors pay themselves no salary, a low salary, or a salary specifically set for tax efficiency reasons, well below NMW levels, without any NMW compliance issue, because their director's fee arrangement does not constitute an employment contract subject to NMW. If you are uncertain whether NMW applies to your arrangement, take advice from an employment lawyer or your accountant.
Use £9,100 if: your company profit is consistently within the small profits band (under £50,000); you do not need the higher declared income for mortgage or credit purposes; and you want to minimise all company costs including employer NI.
Use £12,570 if: your company is in the marginal relief band (profits £50,000–£250,000), where the higher salary deduction is more valuable; you want a clean personal allowance match; you have no other income sources competing for the personal allowance; or Employment Allowance is available to your company (which offsets the employer NI entirely, making £12,570 clearly better).
Consider a salary between £6,396 and £9,100 if: you want to qualify for a National Insurance contributory year (securing State Pension entitlement) at the lowest possible salary without triggering employer NI. A salary of £6,396 achieves this, the director gets credit for the year's NI contributions without any NI actually being paid.
Company profit before salary: £75,000. Scenario A (salary £9,100): No employer NI. Taxable company profit: £75,000 − £9,100 = £65,900. Corporation tax at marginal relief: approximately £16,200 (effective rate ~24.6%). Post-tax dividends available: approximately £49,700. Director takes £49,700 as dividends. Personal income: £9,100 + £49,700 = £58,800. Income tax: salary covered by personal allowance; dividends: £500 allowance, £37,200 at 8.75% = £3,255, £11,600 at 33.75% = £3,915. Total dividend tax: £7,170. Total personal tax: £7,170. Personal take-home: approximately £58,630 (salary + dividends minus dividend tax). Total tax (corp tax + employer NI + dividend tax): £23,370.
Scenario B (salary £12,570): Employer NI £1,139. Taxable company profit: £75,000 − £12,570 − £1,139 = £61,291. Corporation tax at marginal relief: approximately £15,148. Post-tax dividends available: approximately £46,143. Personal income: £12,570 + £46,143 = £58,713. Dividend tax: £500 allowance, £37,200 at 8.75% = £3,255, £8,443 at 33.75% = £2,850. Total dividend tax: £6,105. Total tax: £15,148 + £1,139 + £6,105 = £22,392. Personal take-home: approximately £52,508 (salary + dividends minus dividend tax). Total combined tax: £22,392.
At £75,000 profit, the £12,570 salary route saves approximately £978 in total tax versus the £9,100 route. The difference is modest but real, and it grows larger as company profit increases through the marginal relief band.
For most directors, either £9,100 (no employer NI, efficient for small profits companies) or £12,570 (uses full personal allowance, better for companies in the marginal relief band). The difference in total tax between the two is typically £200–£1,000 per year depending on profit level.
No. A company where the director is the only employee cannot claim Employment Allowance. Employment Allowance is only available where there is at least one worker who is not a director, or where the company has two or more directors who are both employees.
Not automatically. Directors who serve in a purely statutory capacity (without a separate employment contract) are not entitled to NMW. Most limited company directors set their salary for tax efficiency reasons without NMW applying. If you have a service contract as an employee in addition to your director role, NMW compliance should be verified.
£9,100 per year. Employer NI at 15% applies to salary above this threshold. A salary at exactly £9,100 triggers zero employer NI. A salary of £12,570 triggers employer NI on £7,570, costing the company approximately £1,139.
The limited company tax calculator turns this guidance into a concrete estimate for corporation tax, dividends and personal take-home, based on 2026/27 HMRC rates.