National Insurance on Lump Sum Salary

[deasmi]

I think I know the answer to my own question here but thought it worth checking.

Whilst running my service company myself for the first time ( was dormant for a long time ) this year I registered for PAYE with the intention of paying myself a salary but never got round to it until now.

When I enter my salary ( £10000 ) into the P11 calculator on the Employers CDROM from HMRC as a single payment for March I get a huge value of over £3000 in column 7 ( Total tax deducted or refunded in the week or month )

Is this because NI is paid on the period and not over the year ?

If so is there anything I can do about it ?

If not what is causing it or is it correct ?

I am outside of IR35.

Thanks

Dean

[Manic]

NI allowances are per week/month and not peryear so you can'tcarry forward an allowance from month to month unlike paye.

[blacjac]

I wouldn't use a genuine email address as your user name.....


Unless you can hold onto $50,000 for me in your bank account for a couple of months, I'll let you keap $5,000, just send me your bank details......

[deasmi]

Thanks

NI allowances are per week/month and not peryear so you can'tcarry forward an allowance from month to month unlike paye.

Thanks, that's what I thought.

Dean

[Archangel]

Column 7 has NOTHING to do with NI, its purely the tax. Ni is on a different sheet (tab) you need to add the fugures together (employees NI (column 1e) and Tax deducted(column 7)) to get the months deductions.

On 10,000 the only way you could get 3,000 in column 7 is if you have a "K" tax code.

HTH

[deasmi]

Column 7 has NOTHING to do with NI, its purely the tax. Ni is on a different sheet (tab) you need to add the fugures together (employees NI (column 1e) and Tax deducted(column 7)) to get the months deductions.

On 10,000 the only way you could get 3,000 in column 7 is if you have a "K" tax code.

HTH

Then that is very odd as my tax code is 601L

[Archangel]

If you have the "week 1 month 1" button set then it decides to divide the annual tax thresholds and rates by 12, so you've ended up calculating 40% tax on some of it.

Check the settings. (I would scrap it and reload).

Otherwise:

It should be £896.40 tax and £502.15 Employee NI (£584.32 employer NI)


HTH

[deasmi]

Thanks

If you have the "week 1 month 1" button set then it decides to divide the annual tax thresholds and rates by 12, so you've ended up calculating 40% tax on some of it.

Check the settings. (I would scrap it and reload).

Otherwise:

It should be £896.40 tax and £502.15 Employee NI (£584.32 employer NI)


HTH

Thank you very much.

That will be it, I'll start again.

Dean

[xoggoth]

Indeed. Director's NI means monthly NI is paid on an annual average, much like tax. You must have made a wrong selection somewhere.

[ASB]

Indeed. Director's NI means monthly NI is paid on an annual average, much like tax. You must have made a wrong selection somewhere.

Not quite -though that is the ultimate effect. There are a number of ways of operating directors NI, either paying as though a "normal" employee and making a balnacing payment at the EOY, paying nothing until the annual threshold is reached then paying NI on everyhthing or the annual average you describe (the so called exact percentage method). None of this make any difference to the amount that is due, just when it actually get paid.

Sadly the old wheeze of paying a huge salary in one month and nothing the others in order to exceed the overall NI thresholds no longer works - just gives rise to a balancing payment.