Why directors need a year-end check
Directors' Class 1 NIC is assessed on an annual earnings period (or pro-rata if appointed part-way through the tax year). This is why a director's NIC can adjust at year end, especially under the Alternative method.
Standard vs Alternative method
- Standard method (AN): NIC is recalculated cumulatively based on tax-year earnings to date, then NIC already paid is deducted.
- Alternative method (AL): NIC is calculated like a normal employee each pay period, then reconciled in the final payment of the tax year.
- For more information see HMRC - National insurance for company directors
26/27 sanity-check numbers (6 April 2026 to 5 April 2027)
- HMRC - Rates and thresholds for employers 2026 to 2027
- Weekly thresholds: LEL 129, PT 242, ST 96, UEL 967.
- Category A employee rates: 0% (LEL to PT), 8% (PT to UEL), 2% (above UEL).
- Category A employer rate: 15% above ST.
Year-end playbook (final period + first period)
Define your final and first period
- Final period: the pay run with a payment date on or before 5 April.
- First period: the pay run with a payment date on or after 6 April.
- This applies to monthly, weekly, and fortnightly payrolls - payment date is what matters.
Pre-final-period director audit
For each person who should be a director:
- Go to Employees > select employee > General. Here you can confirm the director status and/or set as director. Alternatively, you can export a list of directors from ‘Employees > import/export> export employee data, selecting ‘General’ and ‘Directorship’
- Confirm the director flag is correct.
- Confirm the calculation method is correct (Standard vs Alternative).
Process payroll, submit FPS, then reconcile using FPS totals
After the FPS is transmitted, pull reported values from:
- Payrolls > Actions > Downloads > Full Payment Submission (FPS).
- The correct director method is being reported.
- If using Alternative method (AL), expect a possible final NI payment adjustment because reconciliation happens at tax year end.
Spot-check with HMRC's Director NIC calculator
- Use HMRC's calculator for the current tax year to spot-check software outputs. - HMRC - Director NIC calculator
- Best practice: check at least 1 to 2 AL directors, anyone with a large late bonus, and anyone appointed mid-year.
What if someone stops being a director mid-year?
In UK Payroll
- Employees > select employee > General.
- In the director details, click End and set the end date.
Operational guidance
- If a director ends late in the tax year, double-check the final period and first period to ensure director treatment did not carry over.
- If they remain employed, pay attention to year-end reconciliation outcomes (especially if they were on the Alternative method).
- Best practice: keep a simple director register (name, start date, end date, method) and audit it in the final and first period.