Reply to: Employers NIC Allowance for last year

[WordIsBond]

This mess is a courtesy of my own accountant. I've never done this on my own!

Time to ask the accountant why he's recommended a salary of £13K, as opposed to a salary equal to the personal allowance (£11850 last year) or the National Insurance threshold (£8424 last year). If there isn't a specific and clear explanation as to why this is better for you....

Time to ask the accountant why he's recommended a salary for your wife of £2K+, if a salary up to £8424 wouldn't be much more tax efficient and justified given she has legal responsibilities that justify a larger salary. If there isn't a clear and specific reason....

I suspect you need a new accountant. But there could be reasons that justify these things that you've not told us and that your accountant knows about. So I would ask these questions first. If the answer is weak, change your salary (and the Mrs too) now, and either change your accountant now or wait until your next year end and then change. An accountant that isn't advising you well on contractor & spouse salaries can't be trusted to advise you well on other things, either. This is pretty basic stuff.

[ksareen]

I would guess you would be saving money with a good accountant -- I don't think you are getting it right on your own.

This mess is a courtesy of my own accountant. I've never done this on my own!

[WordIsBond]

Guidance here which explicitly confirms what you've been told.

Single-director companies and Employment Allowance: further guidance - GOV.UK

A company is no longer eligible for the allowance if:

only one employee (or director) in the limited company is paid above the Secondary Threshold
that employee is a director of the limited company
This means that companies with several employees, where the director is the only employee paid above the Secondary Threshold, will no longer be eligible for the Employment Allowance.

You could, of course, increase her pay to the Secondary Threshold for this tax year and then your company would be eligible. Since she has other income, that additional pay would be taxed at 20% Income Tax, but it would not be subject to National Insurance unless you increased her pay further. And you would obviously be saving 19% Corporation Tax, so that would virtually cancel out the extra Income Tax.

Seems like a lot of hassle, though, and you might risk scrutiny of her salary as to whether it is a justifiable business expense. But as an officer of the company she has legal responsibilities for which she should be compensated, so HMRC are unlikely to ever challenge a salary at that level.

Your own salary level doesn't look very tax efficient. If you aren't going to use an accountant, you really ought to take a little time reading carefully from different sources as to what is the most tax efficient approach. Not every source is accurate but you'll quickly figure out who is.


I would guess you would be saving money with a good accountant -- I don't think you are getting it right on your own.

[TheCyclingProgrammer]

Does the second wage not take into consideration the part-time employment with another company? Because if it does, the threshold gets exceeded (please check numbers in the original post).

What she earns for another employer is completely irrelevant. What SimonMac has told you is correct.

[SimonMac]

No it doesn't....

I didn’t want to pick him up on that bit, he seems confused enough as it is

[northernladuk]

The company in question only has 2 employees as mentioned in the original post (so answer is NO)

No it doesn't....

[SimonMac]

Or maybe just prettier?

Not sure, there are some very pretty cartoon characters (Jessica Rabbit ?)

[SimonMac]

The company in question only has 2 employees as mentioned in the original post (so answer is NO)

Then there’s your answer

[ksareen]

Does YOUR company (which you are trying to reduce the NI bill for) pay someone other than you above the Secondary threshold?

The company in question only has 2 employees as mentioned in the original post (so answer is NO)

[northernladuk]

Ok, maybe better isn't the right word, but less tulip?

Or maybe just prettier?

[SimonMac]

Ok, maybe better isn't the right word, but less tulip?

[northernladuk]

*Disclaimer IANAA and do not use one, choosing instead to run my company's finances myself.

Since 2010 I have only made one cock up which cost me £100 as I forgot to include a leap year in my accounts, but still my advise is more than likely tulip.

I am, however, probably as good or better than as some convicted accountants and random people on the internet with no profile picture just a cartoon caricature that I have to ask to help me out regularly

[SimonMac]

Yes, correct


Does the second wage not take into consideration the part-time employment with another company? Because if it does, the threshold gets exceeded (please check numbers in the original post).

I dunno I'm not an accountant!

The link I provided states:

You can’t claim if:

• you’re the director and the only employee paid above the Secondary Threshold

Does YOUR company (which you are trying to reduce the NI bill for) pay someone other than you above the Secondary threshold?

[northernladuk]

Sorry to roll it out again but shouldn't your accountant be sorting this out for you?

[ksareen]

Are you asking if you are entitled to the Employment Allowance to reduce the NI you pay on the husbands wages?

Yes, correct

No you would not able to claim the EA as the second wage is below the Secondary Threshold of £157 per week / £680

Does the second wage not take into consideration the part-time employment with another company? Because if it does, the threshold gets exceeded (please check numbers in the original post).