Directors' National Insurance Contributions: Navigating the 2023/24 Changes

February 23, 2024

As the end of the tax year approaches (April 5th, 2024), employers with directors on their payroll face an additional step beyond the usual year-end routines. This step involves ensuring accurate National Insurance (NI) contributions are made for these directors, taking into account the recent changes implemented in 2023/24.

Understanding NI Earnings Periods for Directors

Unlike regular employees whose NI is calculated based on each pay period, directors follow a different system. They have an Annual Earnings Period (AEP) that considers their cumulative earnings throughout the entire tax year. This means NI deductions can be uneven.

Key points to remember:

  • Each director's payroll record should be marked as "director" in your payroll software.
  • Even if a director resigns during the year, they still have an AEP starting from April 6th.
  • For directors appointed after April 6th, NI thresholds are calculated proportionally.

What's Changed in 2023/24?

The main change for directors' NI is the reduction in the main rate from 12% to 11.5%, effective January 6th, 2024. While applying this reduction to regular employees is straightforward, it requires adjustments for directors due to their AEP.

Two Methods for Calculating NI Contributions:

  1. Normal Calculation:
  • This method applies the following rates based on cumulative earnings:
  • 12% for earnings between £12,570 and £50,270 until December 31st, 2023.
  • 11.5% for earnings above £12,570 from January 1st, 2024 onwards.
  1. Alternative Method:
  • This method treats directors like regular employees, applying standard NI rates to each pay period without considering annual earnings.
  • At year-end, the NI on the final salary payment is adjusted to ensure the total matches the correct annual liability.


  • Employers are not obligated to recalculate NI if a director leaves before the annualised rate applies.
  • Regardless of the chosen method, recalculate NI at year-end even if no earnings were paid after January 5th, 2024.

Avoiding NI Headaches:

The recent NI rate change can lead to errors, especially for directors. To ensure compliance and avoid complications:

  1. Double-check NI already paid: Verify the correct rate was used based on the chosen method and earnings periods.
  2. Review and adjust NI in the last earnings period: Ensure the total annual liability is accurate.

By understanding the changes and following these tips, you can ensure your directors' NI contributions are correct and avoid potential penalties. Remember, consulting with an accountant can provide valuable guidance and ensure smooth navigation of these complex regulations.

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