Tax credits and notional/market rate income for PSC Director

[ASB]

Hmm, I got a letter a few years back stating that I hadn't paid enough NI when I was at Uni and that I needed to either pay them a lump some of around £100 (I think it was around£100 anyway). The letter stated that if I did not pay them I would not be able to claim my state pension until I had worked an extra year.

I got some advice at the time and was told I may as well pay it as potentially it is worth a lot more than the £100 I was paying them. Yes it may be worth nothing when I'm old but as gambles go it has better odds than most.

If I recall correctly the rules were different a few years ago. However if your time at UNI was recent then I imagine it is because you didn't earn over the LEL.

In any event the 100 quid was probably a very good spend.

You can actually do pension forecasts on line now so you can check your contribution record to decide if you need to make voluntary payments.

[dude69]

Hmm, I got a letter a few years back stating that I hadn't paid enough NI when I was at Uni and that I needed to either pay them a lump some of around £100 (I think it was around£100 anyway). The letter stated that if I did not pay them I would not be able to claim my state pension until I had worked an extra year.

I got some advice at the time and was told I may as well pay it as potentially it is worth a lot more than the £100 I was paying them. Yes it may be worth nothing when I'm old but as gambles go it has better odds than most.

Hmm, that's probably because you didn't work full time or something. Paying over LEL or whatever it is called means you earn NI stamp, but don't start paying it till your income is a little higher.

I have never found anything to explain the arcane workings of how much each pound of national 'insurance' earns you in benefits on retirement

[Sockpuppet]

Couple of hundred a year I think? They will send you a letter if you haven't paid enough saying that you can either pay them a lump sum of £XXX or delay your state pension by a year.

I think on £12k a year salary I am paying enough.

[Ardesco]

Zero.

If you earn between the LEL and the primary threshold you still get the years pension credit but pay zero in NI.

Hmm, I got a letter a few years back stating that I hadn't paid enough NI when I was at Uni and that I needed to either pay them a lump some of around £100 (I think it was around£100 anyway). The letter stated that if I did not pay them I would not be able to claim my state pension until I had worked an extra year.

I got some advice at the time and was told I may as well pay it as potentially it is worth a lot more than the £100 I was paying them. Yes it may be worth nothing when I'm old but as gambles go it has better odds than most.

[ASB]

How much NI do we have to pay to qualify for state pension?

Zero.

If you earn between the LEL and the primary threshold you still get the years pension credit but pay zero in NI.

[Ardesco]

How much NI do we have to pay to qualify for state pension?

Couple of hundred a year I think? They will send you a letter if you haven't paid enough saying that you can either pay them a lump sum of £XXX or delay your state pension by a year.

[Sockpuppet]

I don't bother with a pension. It won't be worth anything when I'm old anyway. Pay enough NI to qualify for your state pension and look to other things to provide you with a worthwhile income when you're old IMHO.

How much NI do we have to pay to qualify for state pension?

[Ardesco]

I don't bother with a pension. It won't be worth anything when I'm old anyway. Pay enough NI to qualify for your state pension and look to other things to provide you with a worthwhile income when you're old IMHO.

[GreenerGrass]

Find a job spec for a disguised onshoring role, LogicaCMG could provide one - to be filled from their Indian operation. Probably half the UK salary for the same role in the same location if filled externally.

Point out to the government that it made the whole thing possible through fast track visas to address the "skills shortage" etc.

[dude69]

ok.

Well in case anyone cares, if the 'notional income' is higher than your actual £5.5k salary or whatever, then if you pay the deemed income mostly in the form of a pension, then this is potentially by far the most effective way of getting money into a pension.

If you are paid £7k salary, and your company earns £20k of profits, then it pays 22% CT. You received £15,600 = £17,333 gross

Alternatively, pay the £20k gross into a pension. You then only have income of £7k a year.

Because of the 39% withdrawal rate on tax credits, you get an additional £6,760 of tax credits (assuming you have a kid to earn this level of credits).

So net is £20k + £6.76k = £26.76k vs. £15.6k. Which is 41.7% relief, as a basic rate tax payer.

[Sockpuppet]

Personal Service Company

They don't exist. That's a term HMRC invented to victimise small business.

[dude69]

What's a PSC?

Personal Service Company

[malvolio]

17. Claimants providing services to other persons for less than full earnings
(1) If a claimant provides a service for another person and -
(a) the other person makes no payment of earnings or pays less than those paid for a comparable employment (including self-employment) in
49
the area; and (b) the Board are satisfied that the means of the other person are sufficient for him to pay for, or to pay more for, the service,
the claimant is to be treated as having such an amount of employment income, or in the case of a service provided in the course of a trade or business, such an amount of trading income as is reasonable for the employment of the claimant to provide the service.


Any ideas how this pertains to PSCs paying £5-10k/year salaries to owners and income earners?

As far as I am concerned my income is £6k/year. But my last salary was £40k. And my company makes ~£100k profit.

What's a PSC?

[dude69]

17. Claimants providing services to other persons for less than full earnings
(1) If a claimant provides a service for another person and -
(a) the other person makes no payment of earnings or pays less than those paid for a comparable employment (including self-employment) in
49
the area; and (b) the Board are satisfied that the means of the other person are sufficient for him to pay for, or to pay more for, the service,
the claimant is to be treated as having such an amount of employment income, or in the case of a service provided in the course of a trade or business, such an amount of trading income as is reasonable for the employment of the claimant to provide the service.


Any ideas how this pertains to PSCs paying £5-10k/year salaries to owners and income earners?

As far as I am concerned my income is £6k/year. But my last salary was £40k. And my company makes ~£100k profit.