I'd like to appoint my spouse as a second director of my ltd. She will not be a shareholder. She has no other income. I'd like to draw her salary in a legal and tax efficient way.
Question is about timing of appointment in light of pro-rata NI regulations
According to: https://assets.publishing.service.go.../CA44_2017.pdf directors appointed during the year have pro-rata NI thresholds.
NIC drops from 12% to only 2% above UEL (Upper Earnings Limit).
Spouse will receive remuneration of £11,850.
If she is appointed at the end of tax year, according to pro-rata rules (check table on p 27 of the above publication), her UEL level will be much lower. In extreme situation, if she is appointed at the end of March, her UEL level would be only £866 and her PT (Primary Threshold) only £157.
This means should would pay very minimal NIC on £11,850, namely £305 for this tax year: £85 (on the rate of 12%) and 220 (on the rate of 2%).
If she was appointed earlier, let's say on 1 January, according to the aforementioned table her UEL level would be higher than her annual remuneration (UEL - £12,116) and most of the salary would be NI'd on 12% due to pro-rated low PT level of £2,198. This mean she would pay significantly higher NIC on the same remuneration of £11,850, namely £1,158.
This is much higher than my NIC which is £411 for the same annual remuneration (because I was appointed before start of the tax year).
This means that by delaying appointment as a director by less than 3 months, she would save £853 on NIC, while earning the same, tax-free remuneration in current tax year.
Am I missing something here?
Would the Tax Man leave this kind of opportunity for Contractors, where clearly weekly tables in the document posted above are created to ensure directors appointed throughout the year are treated fairly?
Question is about timing of appointment in light of pro-rata NI regulations
According to: https://assets.publishing.service.go.../CA44_2017.pdf directors appointed during the year have pro-rata NI thresholds.
NIC drops from 12% to only 2% above UEL (Upper Earnings Limit).
Spouse will receive remuneration of £11,850.
If she is appointed at the end of tax year, according to pro-rata rules (check table on p 27 of the above publication), her UEL level will be much lower. In extreme situation, if she is appointed at the end of March, her UEL level would be only £866 and her PT (Primary Threshold) only £157.
This means should would pay very minimal NIC on £11,850, namely £305 for this tax year: £85 (on the rate of 12%) and 220 (on the rate of 2%).
If she was appointed earlier, let's say on 1 January, according to the aforementioned table her UEL level would be higher than her annual remuneration (UEL - £12,116) and most of the salary would be NI'd on 12% due to pro-rated low PT level of £2,198. This mean she would pay significantly higher NIC on the same remuneration of £11,850, namely £1,158.
This is much higher than my NIC which is £411 for the same annual remuneration (because I was appointed before start of the tax year).
This means that by delaying appointment as a director by less than 3 months, she would save £853 on NIC, while earning the same, tax-free remuneration in current tax year.
Am I missing something here?
Would the Tax Man leave this kind of opportunity for Contractors, where clearly weekly tables in the document posted above are created to ensure directors appointed throughout the year are treated fairly?
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