Directors Cumulative Basis NI payment

Discussion in 'Accounts & Finance' started by Karimbo, Jan 25, 2018.

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  1. Karimbo

    Karimbo UKBF Ace Free Member

    1,993 205
    Hi quick question.

    I am a director and tryign to pay myself tax efficiently.

    I pay around the tax free basic amount in PAYE. My accounting software is calculating my contributions after I hit the £8164 p.a limit. The accounting software charges NI after I've hit that amount. https://www.gov.uk/employee-directors

    Which means around month 10 or so my NI contributions ratchet up to a pretty high level. Disproportionally high than what regular employees pay.

    I just want to know how do I ascertain whether if I am paying sufficient NI contributions for that year. Is there a minium amount or minimum months? I can see that I am only paying about 3 months of the year.

    Ideally I'd just like to pay enough NI so that it's contributing towards the state pension.

    Also the employers NI is pretty high too.
     
    Posted: Jan 25, 2018 By: Karimbo Member since: Nov 5, 2011
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  2. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,388 3,834
    For employer's NI, are you a limited company employing anyone other than yourself?

    Director's NI, should work so that, if you paid NI every payday you would pay the same overall amount over the year than if you pay nothing until you have reached the annual threshold. You may find it more convenient not to use the Director's annualised system, and just pay it monthly.

    I think the idea behind it is that Directors don't necessarily pay themselves the same salary every month. Ordinary NI is caculated on the monthly payment, so if an employee earns £360 one month and £999 the next they would pay NI on the second month. If they earned £680 each month (the same total amount) they would not pay NI.

    NI benefits accrue when you earn £490 per month. If you want to avoid NI costs and get benefits pay yourself £680 per month.

    Your accountant should have gone through all of this when setting up your payroll.
     
    Posted: Jan 25, 2018 By: Newchodge Member since: Nov 8, 2012
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  3. Mr D

    Mr D UKBF Legend Free Member

    24,297 2,946
    Yes employers NI is pretty high, however you aren't paying that, your company is.
     
    Posted: Jan 25, 2018 By: Mr D Member since: Feb 12, 2017
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