Employment Allownce / NI

[Martin at NixonWilliams]

SO as I use Nixon Williams, and I enquired why I wasn't paying NI on the basic 833.33...only this morning, I am mildly surprised by Martins comments. Why? because I have just been told I do not need to pay anything in NI at all. So where does the last few months come into the equation as I am not in Month 11 of my financial year.

Colin.

Hi Colin,

I understand that the reason for your query was because you were concerned that with no NI being deducted, you may not earn a qualifying year. We explained that you will earn a qualifying year even if you are not currently paying any NI.

To clarify, based on your current salary level you will have an NI payment to make however this will not apply until the final quarter of the 2014/15 tax year. I will arrange for a follow up email to be sent to you explaining this in more detail.

I am sorry for any confusion caused.

Martin

[TheCyclingProgrammer]

Indeed, that's how I have things set-up. I take Maslins' point, but I don't find it to be any hassle in practice.

Yes, you're doing monthly returns by RTI anyway, its just a single annual payment. It shouldn't be a big deal for anybody paying attention.

[TheCyclingProgrammer]

SO as I use Nixon Williams, and I enquired why I wasn't paying NI on the basic 833.33...only this morning, I am mildly surprised by Martins comments. Why? because I have just been told I do not need to pay anything in NI at all. So where does the last few months come into the equation as I am not in Month 11 of my financial year.

Colin.

Martin is referring to the last quarter of the tax year. Director's NI is normally calculated on a cumulative basis and as such there is no liability until the final months of the tax year. There will be approx. £245 of employees NI that will be due on your final quarterly payment. This still works out tax efficient for most people because you save nearly double that in corporation tax from paying a £10k salary vs the threshold for NIC.

[arthursc0]

PAYE NI

This is a good point but it is worth noting that a director would only need to make a payment in the final quarter.

SO as I use Nixon Williams, and I enquired why I wasn't paying NI on the basic 833.33...only this morning, I am mildly surprised by Martins comments. Why? because I have just been told I do not need to pay anything in NI at all. So where does the last few months come into the equation as I am not in Month 11 of my financial year.

Colin.

[jamesbrown]

This is a good point but it is worth noting that a director would only need to make a payment in the final quarter.

Indeed, that's how I have things set-up. I take Maslins' point, but I don't find it to be any hassle in practice.

[Martin at NixonWilliams]

The £833 saves a bit of tax overall, but the client needs to make payments to HMRC. This isn't difficult of course...but if you're the kind of person who struggles keeping on top of things as it is, it's one extra tax to keep track of that you could completely avoid by opting for £663. I imagine that's what the accountant meant by hassle.

This is a good point but it is worth noting that a director would only need to make a payment in the final quarter.

[Maslins]

I personally think it is a bit of hassle. Not the ticking of the box to claim it, but the fact that to get any benefit from it you'd need to be suffering, and paying over NICs to HMRC.

So to my mind there's two main choices:
1) pay £663/month. This is slightly less tax efficient (assuming company qualifies for employment allowance and there aren't other staff that would use it up), but it keeps things simple, as there'll be no deductions at all in any month in the tax year, so net pay = gross pay.
2) pay £833/month. Employment allowance means you won't suffer employer's NICs (again subject to the caveats above), but you will still suffer employee's NICs. If you're a director, this tends to mean no impact in months 1-9 or so, but the last few months the net pay will be lower than gross pay, with some NICs payable to HMRC.

The £833 saves a bit of tax overall, but the client needs to make payments to HMRC. This isn't difficult of course...but if you're the kind of person who struggles keeping on top of things as it is, it's one extra tax to keep track of that you could completely avoid by opting for £663. I imagine that's what the accountant meant by hassle.

[Louisa@InTouch]

You are saving money, so as said by TheCyclingProgrammer, it's a no brainer!

If you are eligible for the scheme, this will save you paying any employers NI up to £2,000. Even with a small salary, this is better than nothing.

Also, if you wanted to increase your salary for the year, you could earn up to £22,400 without paying any employers NI. But bear in mind this would mean further income tax and employees NI due.

But as long as your accountant has made the claim, you are eligible then it's no hassle for you. Instead you are making some tax savings!

[jamesbrown]

The guidance PDF (here) explaining the change says:

You do not carry out a function of a public nature, if you are:

• providing security and cleaning services for a public building, such as government or local council offices
• supplying IT services for a government department or local council

Indeed. Although it's a reasonable assumption that the OP works in IT, not everyone here does (I don't, for example), so it's better that they check with their accountant regarding eligibility.

[Jessica@WhiteFieldTax]

It's very unlikely to have any negative effect in your set up, so it's probably safe, and easy, to yes to your accountant.

[SueEllen]

I think you're asking whether this is any hassle for you. The answer is no, your accountant will handle it for you. This has no impact on the "status" of your company (whatever that may mean). Certain eligibility criteria apply (primarily, the ineligibility of public sector work), and your accountant should confirm that these criteria are met.

The guidance PDF (here) explaining the change says

You do not carry out a function of a public nature, if you are:

• providing security and cleaning services for a public building, such as government or local council offices
• supplying IT services for a government department or local council

[jamesbrown]

I think you're asking whether this is any hassle for you. The answer is no, your accountant will handle it for you. This has no impact on the "status" of your company (whatever that may mean). Certain eligibility criteria apply (primarily, the ineligibility of public sector work), and your accountant should confirm that these criteria are met.

[TheCyclingProgrammer]

Why wouldn't you do it? No brained.

[diesel]

My accountant asked me if I wish to be part of the https://www.gov.uk/claim-employment-allowance scheme to save on NI payment each.

They estimate a saving of £160 pa.

Is it worth it for 1 man single LTD Co or just more hassle? welcome any views as my accountant is up to speed with tax/accountancy laws but not familiar if this may impact my 1 man Ltd Co set up/status.

before anyone says I should change account - to be honest had no real need for this.