What's covered in this guide?:
Directors Pay
Directors have different NIC rules than standard employees. Once marked as a director in payroll, their NICs will be calculated using HMRC’s director-specific rules, which take into account:
The date of their appointment as a director
The chosen NIC calculation method
By default, director NIC is calculated on a cumulative, annual basis across the whole tax year, rather than per pay period like a standard employee, this is the core reason director NIC exists as a distinct calculation. This ensures NICs are correctly calculated over the tax year and reflected in official submissions and reports.
Set Up a Director
To set up a director:
Go to: Staff > Employee > Payroll > Tax Information
Enable Director Status: Tick the checkbox “Yes”
Enter Directorship Start Date: Add the official date the employee became a director.
Tick the checkbox for:
“Use alternative method for calculating directors' NICs” if you want to use the alternative method, which calculates NICs on a per earnings period basis (e.g. weekly or monthly), just like regular employees.Click 'Save' to save changes
Directors Pay on Payslips and Reports
Once a director is set up:
Payslips:
NICs will be calculated using the director’s selected method and shown clearly in the deductions section.P60s:
Year-end totals will reflect correct NIC for directors, calculated using annual NIC brackets from their year-to-date earnings.FPS submissions:
The director's NIC information will be submitted to HMRC accurately, including which calculation method was used (reported to HMRC as "Annual" or "Alternative"), along with the tax week they were appointed as director.