tax-free directors salary

[Kugel]

Pay £7,072 salary (£589 per month) - no employers NIC, CT relief for company is 20%x(12x£589) = £1,413.60

Pay £7,225 salary (£602 per month) - employers NIC is 13.8%x(12x£602-£7,072) = £20.98, CT relief for company is 20%x(12x£602+£20.98) = £1,449

There is a CT saving paying a salary of £7,225 of £35.40 for an extra £20.98 employers NIC.

[kingcook]

Pay £7,072 salary (£589 per month) - no employers NIC, CT relief for company is 20%x(12x£589) = £1,413.60

Pay £7,225 salary (£602 per month) - employers NIC is 13.8%x(12x£602-£7,072) = £20.98, CT relief for company is 20%x(12x£602+£20.98) = £1,449

There is a CT saving paying a salary of £7,225 of £35.40 for an extra £20.98 employers NIC.

Can any accountants confirm this?

If so.............

[Nixon Williams]

There is a slight saving on paying a salary upto the employees threshold of £7,225 instead of the recommended £7,072.

However, by doing so the company will need to make quarterly payments of NIC to HMRC, so this very small saving is generally not worth the extra effort of the client having to make regular payments to HMRC and risk being fined if they are late etc.

Alan

[kingcook]

There is a slight saving on paying a salary upto the employees threshold of £7,225 instead of the recommended £7,072.

However, by doing so the company will need to make quarterly payments of NIC to HMRC, so this very small saving is generally not worth the extra effort of the client having to make regular payments to HMRC and risk being fined if they are late etc.

Alan

Cheers, Alan.

Well an extra £35.40 in my pocket means 12 pints of beer in my local

[Kugel]

However, by doing so the company will need to make quarterly payments of NIC to HMRC, so this very small saving is generally not worth the extra effort of the client having to make regular payments to HMRC and risk being fined if they are late etc.

Quarterly payments? Really? Secondary threshold of £7,072 will be exceeded in month 12. Until then there are no employers NICs due.

[Kugel]

Well an extra £35.40 in my pocket means 12 pints of beer in my local

It is actually extra £14.42 in your pocket. More like 4 pints.

[doodab]

Quarterly payments? Really? Secondary threshold of £7,072 will be exceeded in month 12. Until then there are no employers NICs due.

It doesn't work like that. If it did then regular employees would end up with a different amount in their pay packet every month.

[MrRobin]

It is actually extra £14.42 in your pocket. More like 4 pints.

Correct. Plus it's not actually in your pocket, the saving is in CT so it's still in the company. If you normally take dividends right up the 40% band then you will have to reduce them accordingly to remain under it because your salary has gone up. If you don't then you'll be paying 25% tax on that £14.42.

Down to 3 pints.

[MrRobin]

It doesn't work like that. If it did then regular employees would end up with a different amount in their pay packet every month.

He's talking about ER's NI, not EE's NI.

[Kugel]

It doesn't work like that. If it did then regular employees would end up with a different amount in their pay packet every month.

I am not a regular employee. I am a Director.