• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Salary level / NIC contributions

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    Salary level / NIC contributions

    Hi all

    I'm a Ltd company, single shareholder, no other earnings.

    My accountant has recommended a salary level of £13k, to meet with national minimum wage requirements. I've pointed out that NMW doesn't apply to directors, and I don't generally work 40hours per week in any case. They've then said that they recommend £13k as it's advised to pay minimum tax and NI to HMRC. If I take £10K I will still pay some tax but no NIC (due to the employment allowance).

    Is anyone else advising increasing the salary to keep some NIC payments? I believe that it's advisable to ensure a credit for NIC purposes (to help in terms of future state pension and other benefits) but I'm not sure with the employment allowance whether those credits will occur if my company is reducing its NIC contributions due to the allowance.

    Any help / advice welcome!

    Thanks

    Paul

    #2
    Hi Paul,

    Welcome to the forum! This question comes up fairly regularly:
    http://forums.contractoruk.com/accou...-min-wage.html
    http://forums.contractoruk.com/accou...alary-10k.html

    These should confirm that you don't have to pay NMW if you don't want to but might want to consider the £12K salary to entitle you to employee statutory payments.

    Comment


      #3
      Originally posted by administrator View Post
      Hi Paul,

      Welcome to the forum! This question comes up fairly regularly:
      http://forums.contractoruk.com/accou...-min-wage.html
      http://forums.contractoruk.com/accou...alary-10k.html

      These should confirm that you don't have to pay NMW if you don't want to but might want to consider the £12K salary to entitle you to employee statutory payments.
      <pssst> Don't forget to tell him about the search option...
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Why pay NI when you don't have to? I'd move accountants.
        Blood in your poo

        Comment


          #5
          Originally posted by Paul WSS View Post
          Hi all

          I'm a Ltd company, single shareholder, no other earnings.

          My accountant has recommended a salary level of £13k, to meet with national minimum wage requirements. I've pointed out that NMW doesn't apply to directors, and I don't generally work 40hours per week in any case. They've then said that they recommend £13k as it's advised to pay minimum tax and NI to HMRC. If I take £10K I will still pay some tax but no NIC (due to the employment allowance).

          Is anyone else advising increasing the salary to keep some NIC payments? I believe that it's advisable to ensure a credit for NIC purposes (to help in terms of future state pension and other benefits) but I'm not sure with the employment allowance whether those credits will occur if my company is reducing its NIC contributions due to the allowance.

          Any help / advice welcome!

          Thanks

          Paul
          The most tax-efficient salary for a director owned company is £10,000 for 2014-15. This is because beyond this level PAYE @20% kicks in and nutralises the CT savings. CT savings because your salary is an allowance expense for CT purposes so it saves 20% CT.

          Comment


            #6
            Originally posted by Paul WSS View Post
            Hi all

            I'm a Ltd company, single shareholder, no other earnings.

            My accountant has recommended a salary level of £13k, to meet with national minimum wage requirements. I've pointed out that NMW doesn't apply to directors, and I don't generally work 40hours per week in any case. They've then said that they recommend £13k as it's advised to pay minimum tax and NI to HMRC. If I take £10K I will still pay some tax but no NIC (due to the employment allowance).

            Is anyone else advising increasing the salary to keep some NIC payments? I believe that it's advisable to ensure a credit for NIC purposes (to help in terms of future state pension and other benefits) but I'm not sure with the employment allowance whether those credits will occur if my company is reducing its NIC contributions due to the allowance.

            Any help / advice welcome!

            Thanks

            Paul
            Hi Paul,

            You are correct in saying NMW does not apply to directors, providing there is not a contract of employment in place.

            The NI incentive only applies to employers NI. There will therefore still be employees NI deducted on a salary of £10,000. We suggest £10,000 to the majority of our clients who are eligible for the NI incentive.

            Note that you also only need to pay a salary of £5,772 in order to earn an NI credit for state pension purposes, there is not a requirement to actually pay any NI.

            I hope this helps.

            Martin

            Comment


              #7
              Originally posted by administrator View Post
              Hi Paul,

              Welcome to the forum! This question comes up fairly regularly:
              http://forums.contractoruk.com/accou...-min-wage.html
              http://forums.contractoruk.com/accou...alary-10k.html

              These should confirm that you don't have to pay NMW if you don't want to but might want to consider the £12K salary to entitle you to employee statutory payments.
              Why £12K? I always though it salary was over £5772 or whatever you got credited even if you didnt pay NI?
              Rhyddid i lofnod psychocandy!!!!

              Comment


                #8
                Originally posted by psychocandy View Post
                Why £12K? I always though it salary was over £5772 or whatever you got credited even if you didn't pay NI?
                If you want to claim SSP, SMP or SPP then you must be an employee. If you're an employee then you could argue that NMW would apply......

                There's no requirement to pay PAYE at all if you'd rather not, unless you're subject to IR35.
                ContractorUK Best Forum Adviser 2013

                Comment


                  #9
                  Originally posted by Clare@InTouch View Post
                  If you want to claim SSP, SMP or SPP then you must be an employee. If you're an employee then you could argue that NMW would apply......

                  There's no requirement to pay PAYE at all if you'd rather not, unless you're subject to IR35.
                  Last year I claimed SPP with no problems. And my salary was £7488.

                  Not quite sure the connection between NMW though?
                  Rhyddid i lofnod psychocandy!!!!

                  Comment


                    #10
                    Originally posted by Sausage Surprise View Post
                    Why pay NI when you don't have to? I'd move accountants.
                    This is a complete overstatement. Accountants (as with any other professionals) vary with their opinions, and suggesting NMW is a valid opinion. It isn't a requirement, and you can dispute the significance w/r to increasing your risk of investigation (there is no evidence and little argument to suggest it would), but it is somewhat less aggressive than paying to the secondary NI threshold or making optimal use of the NI incentive, plus it's a requirement if you do have, or decide to put in place, a formal contract of employment and, arguably, if you claim employee benefits. As a business owner, you should be able to take advice and think for yourself without dumping the baby.

                    Comment

                    Working...
                    X