Employees NI As Ltd Director

[Owl]

Hi,

Im not earning as much but say im not full PAYE and paying approx 20K a year (1667 a month gross).

Does this mean no NI needs to be paid till month 4 as that's when id hit the 5225 threshold?

(1667*4 - 5225) x 11% = £158.62

Similarily, employer

(1667*4 - 5225) x 12.8% = £213

And these do not then need to be paid till month 4?

So

Months 1-3 : Just 1 PAYE tax sent to IR, at month 4, 2 PAYE and NI to IR?

Could anyone clarify this is the correct way?.....

[Nixon Williams]

So in this case, the first month you would pay:

(10000 - 5225) x 11% = £525.25

Second and third month

10000 * 11% = £1100

Fourth month

4840 * 11% + 5160 * 1% = £584

And for month 5 to 12

10000 * 1%= £100

Do I pass my CIMA????

Yes, to the calculation, CIMA exams are a bit more involved!

[MrRobin]

So in this case, the first month you would pay:

(10000 - 5225) x 11% = £525.25

Second and third month

10000 * 11% = £1100

Fourth month

4840 * 11% + 5160 * 1% = £584

And for month 5 to 12

10000 * 1%= £100

Do I pass my CIMA????

[Nixon Williams]

Hope this explains?

National Insurance calculations are normally done each time a payment of salary is made and would not normally take into account what had been paid in prior months (unlike PAYE). However the treatment for Director’s is different and the National Insurance calculations are done on a cumulative basis.

The important thing to remember is that the overall amount of National Insurance that an individual pays is usually no different whether they are a director or just an employee; however there is a difference with the timing of the payments. A normal employee would pay an equal amount each month; however a director would pay their National Insurance in varying amounts each month.

National Insurance paid by an employee or a director are payable at the rate of 11% for earnings between £5,225 and £34,840 for the current year (2007/8) giving a payment of £3,257.65 – In addition an extra 1% is payable for earnings above £34,840, there is no limit for this.

For normal employees this sum is divided by 12 and an equal amount paid each month.

Employer National Insurance contributions have no maximum level; they are due on all salary payments at 12.8% on amount over £5,225 (2007/08)

Alan

[Bumfluff]

£10k what? Per month, per year?

Sorry per month £10k so £120k a year

[Ardesco]

£10k what? Per month, per year?

[Bumfluff]

If you went full PAYE through your ltd and were a director, would the employee NI still be calculated as follows ?

Nil £0 - £420 per month
11% of £420 to £2,795 per month
1% above £2,795 per month

So lets assume £10k income calcs as follows

0-£420 = £0
11% of £2795 - £420 = £261.25
1% of £10000 - £2795 = £72.05
Total Employee NI = £333.10

Is there an instance when 11% employee NI would be applied across the whole income ?