Salary for 2020/2021

[PerfectStorm]

What Salary are folks going for for the 2020/2021 tax year?

Nixon Williams offers this advice:

From 6 April 2020, the Secondary NI threshold increases to £8,784 per annum which equates to £732 per month. Salary paid at this level will attract no Employer’s or Employee’s National Insurance Contributions, but if taken for a full year, will still make a qualifying year for State Pension and benefit purposes.

From 6 April 2020, the Primary NI threshold will increase to £9,500 per annum which equates to £791.50 per month. If you wish to pay a salary at this level although you would incur some Employers NIC at 13.8%, you would attract corporation tax relief at 19%.

So it sounds like £9,500 is the one to go for if you don't mind making a few extra NIC payments?

[Maslins]

We had a debate in the office and opted for the slightly higher salary, so £791/month (so £9,500/year ignoring rounding). Think it ends up at circa a £50 saving over the year once all tax/NIC both company and personal is factored in.

Yes this will lead to employer's NICs, but that should just be one payment shortly following the tax year. The nice thing is because it's this way round (ie employer's NICs rather than employee's NICs) you can still just set your monthly standing order for salary to be £791, without worring about a little deduction towards the end.

[Agent]

Interesting, my accountant has recommended an increase to £732 - I may have a chat with him

[ladymuck]

I'll just do my usual of paying up to base rate threshold

[WordIsBond]

If your spouse is a director and taking a salary, and so you are using Employment Allowance, £9500 a year means no tax liability.

Unless you have other employees which are using up the employment allowance anyway.

[genius]

£8,760

Optimum Director Salary and Dividends 2020/21 – Limited Company Directors - JF Financial

[WordIsBond]

£8,760

Optimum Director Salary and Dividends 2020/21 – Limited Company Directors - JF Financial

They are mostly wrong.

If you pay the additional £740 to get to £9500, you pay 13.8% employer NI but save 19% Corporation Tax. It means you pay a little more tax personally but your company will have extra money to pay you dividends that more than make up for it.

[genius]

Who really cares though? We're talking pennies here?

[Maslins]

Who really cares though? We're talking pennies here?

On the whole I agree with this. The overall tax difference between ~£8,784 and ~£9,500 is very modest, and the latter will require the small hassle of an additional payment to HMRC not required for the typical client opting for the former. Hence why it wasn't an obvious choice and we debated internally. In the end we feltb slightly bigger risk of clients being annoyed if they felt we'd taken the lazy option and cost them ~£50, than being annoyed about having to make an extra payment that we'd highlight to them in ~13 months time.

[Mephisto]

Tax dodgers!