Director’s Remuneration Strategy

As part of many tax efficient remuneration strategies, director’s salaries are generally aligned with either the national insurance primary threshold or the personal allowance.

A key national insurance change announced in the autumn 2024 budget saw the employers secondary threshold, which triggers employers national insurance becoming payable, being reduced from £9,100 to £5,000. Furthermore, the income tax personal allowance has been frozen at £12,570 since April 2021. This freeze was extended to April 2031 in the 2025 budget.

If you’re the only director in your company, you have several options to consider, all of which would result in no income tax liability:

Option 1 – £5,000 Annual Salary (£416.66 monthly) this would then mean:

• There would be no Employer’s NI contributions required
• That this would not count as a qualifying period for State Pension purposes
• This would maximise funds available for dividends
• Some corporation tax relief would be available on salary

Option 2 – £6,500 Annual salary (£541.66 per month) means:

• This would give you one year towards qualifying for State Pension purposes
• There will be a liability to Employers NIC of £225 per annum; however, if there is more than one eligible employee on the payroll then the Employment Allowance could be claimed
• Corporation tax savings outweigh NI cost
• However, £6,070 of personal allowance would be left behind.

Option 3 – £12,570 Annual Salary (£1,047.50 per month) means:

• Utilise full personal allowance for income tax purposes
• One year towards qualifying for State Pension purposes
• Maximises corporation tax deduction
• However higher employers NIC costs (£1,135.50 annually)

For those Directors already aligned with the personal allowance, salaries will remain at £12,570 per annum, £1,047.50 per month or £241.73 per week.

For R&D intensive businesses it may be appropriate to pay additional salary over and above option three in order to maximise R&D tax credit claims. This should be discussed with your Clive Owen LLP relationship partner. You may also wish to refer to our salary vs dividends post budget 2025 article.

If you require a change in salary then please advise us before 1^st April 2026.

Should you have any queries please do not hesitate to contact your Relationship Partner.