What’s the Most Tax Efficient Director’s Salary in 2022/23? | UPDATED

The employment allowance has increased to £5k for 22/23 tax year but also worth noting that the Employment Allowance isn’t available to companies where the only person on the payroll is a director, i.e. ‘Sole director employee’ limited companies.

• Option 1: Gross of £12,570 (PA Rate) = £1,047.50 per month / £241.00 per week.
  • No Tax
  • Employee annual NI = £357.00 (rounded) payable (will kick in towards end of tax year) 
  • Employer annual NI = £523.00 (rounded - not payable with £5k Employers Allowance) 

• Option 2: Gross of £9,100 (Secondary NI Threshold) = £758.00 per month / £175.00 per week. (Probably the better option for sole directors that cannot claim the Employment Allowance) 
  • No Tax
  • No employee’s NI
  • No employer’s NI

• Still above the Lower Earnings Limit, so will still earn NI credits towards state pension.

• Option 3: Gross of £11,908 (Primary NI Threshold - This is based on 3 months at the current threshold and 9 months on the new higher threshold from July) = £992.33 per month / £229.00 per week. 
  • No Tax
  • No employee’s NI
  • Employer annual NI = £422.00 (rounded - not payable with £5k Employers Allowance)
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If the above seems ok, are you ok as a general rule, that those that were option 2 for 21/22 (£736.00 per month)  will increase to £758.00 and those that were on the option 3 for 21/22 (£797.00 per month) will increase to the £992.33.