Employer NIC at 15%: Rebuilding Your Salary and Dividend Mix in 2026

The April 2025 Employer National Insurance overhaul did more to disrupt owner-managed company tax planning than any single policy change in the last decade. Rate up to 15%. Secondary threshold down to £5,000. Employment Allowance still available for most small employers, but not for director-only companies. By the time we got to the 2025/26 year-end, the optimum salary level for a director-shareholder looked nothing like it did in 2024.

Now that 2026/27 is fully in flight, the picture has stabilised. This post walks through the new maths, the practical answer for most Kent owner-managers, and the wider planning moves the NIC change has opened up.

The numbers that matter in 2026/27

The relevant rates and thresholds for an owner-managed limited company:

• Personal allowance: £12,570, frozen until April 2028.
• Basic rate band: up to £50,270.
• Secondary (employer) NIC threshold: £5,000.
• Primary (employee) NIC threshold: £12,570.
• Employer NIC rate above the secondary threshold: 15%.
• Employee NIC main rate: 8%.
• Dividend allowance: £500.
• Dividend tax: 10.75% basic / 35.75% higher / 39.35% additional (rates rose 2 points from April 2026).
• Corporation tax: 19% on profits up to £50,000, marginal relief band (26.5% effective) to £250,000, 25% above.
• Employment Allowance: £10,500, available to qualifying employers (not director-only companies).

The simplest planning question: what salary should I take?

For a single-director company with no other employees and no Employment Allowance, our recommended salary for 2026/27 is £12,570 — the full personal allowance.

At £12,570 the director pays no income tax (it is covered by the personal allowance) and no employee NIC (the primary threshold is also £12,570). The company pays employer NIC only on the slice above the £5,000 secondary threshold: (£12,570 − £5,000) × 15% = about £1,136. Crucially, both the salary and that employer NIC are deductible against corporation tax.

Stopping at £5,000 avoids the £1,136 of employer NIC, but it leaves £7,570 of personal allowance unused. Taking that £7,570 as salary instead extracts it at 0% personal tax, earns corporation tax relief on both the salary and the NIC, and secures a qualifying year towards the state pension. For most director-only companies the extra corporation tax relief outweighs the modest employer NIC cost — which is why we recommend £12,570 rather than £5,000. The exception is a loss-making or very low-profit company, where we would revisit it.

For companies with multiple employees

If the company qualifies for the Employment Allowance, a £12,570 salary becomes even more attractive. The allowance (£10,500 for 2026/27) offsets employer NIC, so the £1,136 due on a director’s £12,570 salary can be wiped out entirely where the allowance is not already used up by the wider team.

For a typical Kent SME with two or three employees, some or all of the allowance may be absorbed by the team’s employer NIC first — so whether the director’s NIC ends up fully covered depends on the payroll as a whole. Either way, £12,570 remains our starting recommendation; we model the exact position company by company.

Why the rest comes out as dividends

After salary, the remainder of profits is taxed at 19% (or up to 26.5% in the marginal band between £50,000 and £250,000) within the company, and then distributed as dividends taxed at 10.75% in the basic rate band, 35.75% in the higher rate band, and 39.35% in the additional rate band for 2026/27.

For a single-director company on £60,000 of profit (before the director’s salary), the 2026/27 mix we would typically recommend is:

• Salary of £12,570, plus about £1,136 of employer NIC — both deductible against corporation tax.
• Corporation tax on the remaining £46,294 of profit at 19% = about £8,796.
• Distributable profit of about £37,500, paid as dividends.
• Dividend tax of about £3,978 (basic-rate dividends at 10.75%, after the £500 allowance).
• Total personal take-home of around £46,100 — salary plus dividends, net of tax.

Compared to a sole trader on the same profit, the limited company route generally still comes out ahead — though the gap has narrowed with employer NIC at 15% and the April 2026 dividend rate rise. The right structure is rarely about tax alone; limited liability and flexibility matter too.

The three moves the NIC change has unlocked

The most useful planning shifts we have seen with clients in 2026 are:

1. Employer pension contributions are now relatively more attractive. They avoid employer NIC entirely, retain corporation tax relief, and are not subject to income tax until drawn. A £10,000 employer pension contribution beats £10,000 of additional salary on almost every metric.
2. The case for a spouse on the payroll has weakened. Putting a non-working spouse on a token salary used to be a small but real planning win. The lower secondary threshold means the employer NIC cost can outweigh the income tax saving. Worth re-modelling rather than assuming.
3. Profit retention is more valuable. For directors who do not need all the cash, leaving profits in the company (taxed at 19% or 25%) and extracting them over future years at lower marginal rates is a stronger position than it was. This is especially relevant if you are heading towards a sale or wind-up.

Where Kent SMEs are getting this wrong

The three patterns we see most often:

• Salary left at the £5,000 secondary threshold. Stopping there to dodge employer NIC leaves personal allowance unused; for most director-only companies £12,570 extracts more, entirely tax-free.
• Dividends declared retrospectively or in lumps. Late or backdated dividend paperwork is one of HMRC’s easier wins on enquiry. Document each dividend formally and in real time.
• Pension contributions left until March. Spreading employer pension contributions over the year gives you the cash flow benefit and avoids the year-end scramble.