Director salary and your state pension, 2026/27
Updated 20 October 2026. Figures checked against official sources on 20 October 2026.
A salary from your own company can build state pension years without you paying any National Insurance. A salary of at least £6,708 a year counts as a qualifying year. You pay employee National Insurance only above £12,570, and income tax only above your personal allowance of £12,570.
Worked example
From 85, your income falls short of the £28,000 a year you want.
- Age now
- 52
- Retire at
- 60
- Pots
- £270,000
- Take-home wanted
- £32,000 a year
- Plan until
- 95
What each salary costs and builds
For a director with no other income, and company profits of £50,000 or less:
| Salary a year | Counts towards your state pension | Company's National Insurance | Your National Insurance | Your income tax | Corporation Tax the company saves |
|---|---|---|---|---|---|
| £5,000 | No | £0 | £0 | £0 | £950 |
| £6,708 | Yes | £256 | £0 | £0 | £1,323 |
| £12,570 | Yes | £1,136 | £0 | £0 | £2,604 |
| £20,000 | Yes | £2,250 | £594 | £1,486 | £4,228 |
The company pays employer National Insurance at 15% above £5,000 a year. Salary and employer National Insurance are both business costs, so the company pays less Corporation Tax (19% of both).
Employment Allowance
Employment Allowance takes up to £10,500 a year off a company's employer National Insurance. A company can't claim it if its only director is also its only employee paid above £5,000.
Your state pension
The full new state pension is £12,548 a year, for 35 qualifying years of National Insurance. Each year with a salary of at least £6,708 counts. Your GOV.UK forecast shows your record. See state pension age and amount.
Your retirement income
The worked example is a director aged 52 taking a small salary, with their company paying £20,000 a year into their pension until 60. From 85, your income falls short of the £28,000 a year you want. Try the calculator with your own figures.
Questions people ask
What salary does a director need for the state pension?
At least £6,708 a year in 2026/27, the Lower Earnings Limit. From there the year counts towards your state pension, and you pay no employee National Insurance until £12,570.
Does a director paying themselves £12,570 pay National Insurance?
You pay none, and no income tax if it's your only income. The company pays £1,136 of employer National Insurance on it, and saves £2,604 of Corporation Tax on the salary and that National Insurance.
Can a one-director company claim Employment Allowance?
Not if the director is the only employee paid above £5,000 a year.
Sources
Rates and rules were checked against these on 20 October 2026. Worked-example figures come from the calculator, using 2026/27 tax rules.