£12,500 lump sum payment or monthly salary for minimum NICs?

[A K]

So Im a bit confused. If I paid myself £12,500 at the end of the tax year, lets sat March, from my Ltd company as a director, would the NICS be the same or more compared to if I paid myself monthly £1041.66 from the beginning of the year?

Obviously the NICS may be larger at the moment of payment, as you paid £12500 in one payment, but surely HMRC will take into account your total income during the tax year and give you a tax refund down the line?

Does it make a difference if it is being paid to a director or a regular employee?

Any advice will be helpful :-D
Thanks

 

[SteveHa]

NIC would be broadly the same, though it's not necessarily (or even likely to be) an efficient strategy.

 

[justintime]

It's fine to do that as a Director, as the NIC is based on the year, not monthly.
Don't do it for an employee though, the NIC's will be based on the month the payment is made, which would be extremely costly for the employee.

 

[Newchodge]

Why repeat your question when it has already been answered?

 

[MyAccountantOnline]

@A K have a read of this I think you'll find it helpful https://www.gov.uk/employee-directors

 

[A K]

NIC would be broadly the same, though it's not necessarily (or even likely to be) an efficient strategy.

I thought paying up to the personal allowance is a tax efficient strategy?

 

[A K]

Why repeat your question when it has already been answered?

This is my original post actually. I posted on another thread as well afterwards as there were already eyes on that question so thought this one will be more likely to be answered as well!

 

[A K]

It's fine to do that as a Director, as the NIC is based on the year, not monthly.
Don't do it for an employee though, the NIC's will be based on the month the payment is made, which would be extremely costly for the employee.

So the employee will not get a tax refund at the end of the year? Obviously HMRC tax in the manner they do as they presume you will make the same amount every month. But after the end of the tax year do they not do the calculations and then provide a refund on the surplus NIC that was paid?

 

[Newchodge]

So the employee will not get a tax refund at the end of the year? Obviously HMRC tax in the manner they do as they presume you will make the same amount every month. But after the end of the tax year do they not do the calculations and then provide a refund on the surplus NIC that was paid?

No NI is levied every payment period. It is not cumulative like PAYE is.

 

[SteveHa]

I thought paying up to the personal allowance is a tax efficient strategy?

Almost certainly not. You will pay NIC on salary above £719 per month, and your company will pay employer's NIC. A combined total of £25.8%, which can be wholly avoided with no detriment with a little planning.