Directors National Insurance

[bell]

My recently formed Ltd company ( I have 100 percent of shares and am only Director and the only person acting on behalf of the company) has done one job (creative design field) which took me a few days - the company was only ever intended as a part-time ventue. What is the situation on Directors NI ?Prior to forming the Ltd company i was classed as self employed, I'd not done any work for a good while but had recently started paying NI on a voluntary basis after being exempt. In the scenario of the director only actually doing any work for say, a week in a year, and a company turning over less than 4K what is the situation re the company having to pay employers contributions in NI for the director? I'm guessing that the Director can't just remain freelance and bill their own company for their time if work is conducted. as mentioned, the company turnover is less than 4K and I've not drawn a salary as yet.

 

[Jean@wincom]

I'm not an expert but I have been running a payroll for one of my small business clients and had to get to grips with the regulations.

You can get guidance from the HMRC Employers' CD - which you should have - or from their website www.hmrc.gov.uk/employers

In notes I've downloaded from the CD it's clear that, even if you only take on an employee for one week, if their earnings fall above the relevant threshold, you have to deduct NI and tax and keep the relevant records.

As a Director you will have been employed since the company was set up, ie more than a week, but if you haven't drawn a salary, you haven't been paid above the thresholds. But I suspect you should have set yourself some sort of salary - last year I believe the most tax efficient one recommended by accountants was £415 a month. NI conts for this were under £1 a month. If you didn't actually want to take out the cash, you could keep it in the bank but, in your accounts, transfer it monthly to something like a director's loan account as your investment.

This is probably what I would do but perhaps someone more knowledgable would have other ideas.

 

[Gillie]

I take it you have set up a PAYE scheme? Therefore the recommended information that comes with it should let you know the ins and outs of it all. Even if you are paying yourself a dividend instead of a set wage, you still need to pay NI.

 

[bell]

Thank you for replying. No, I've not set up a PAYE arrangement. i have not drawn any salary at all and aside for 500 pounds printing bill which came after i was ltd but before my company bank account was set up (so i paid it myself - understand this is 'directors loan' when i take it back from the company bank account into my own) I've not taken anything out of the company account. Is it essential for all directors to pay NI even if they are not getting paid a salary or dividends?

I've now been offered a job so will either sell or close the company...its really making sure I'm paid up on everything and all is in order before I do...the company has turned over under 4K and I'm wondering if i can pay myself this as a salary before closing the company...otherwise what happens to it!

 

[Gillie]

I can only answer on my experiences and that was being paid the minimum of approx £415 per month and therefore paying the NI both employers and employee as it was done through PAYE and then also taking a dividend but this of course at the end of the year was subject to tax.