Do I HAVE TO pay NI as the company director?

[Biohyt]

Hello everyone. Can you please tell me your thoughts about this question;

Suppose that I do not want to pay any type of NI (whether its contributions/deductions, or class 1,2,3,4), as the sole director of a company (no employees). I do not care about paying higher income tax, but I do not wish to make any payment related with NI.
Can I guarantee this by avoiding salary income, and paying myself dividends even if I receive high amount of dividend payments; lets say £500000 (made up number) per month ?

Thank you

 

[numbersrule]

I think the question you are asking is a question I have often asked myself, and that is:

Am I compelled to pay myself a salary before I take a dividend?

Obviously, no you are not. Because dividends do not have any means of having such a requirement.

Conventional tax wisdom says that it is normally advantageous to take a salary up to the personal allowance before paying a dividend.

However, if, for example you are employed elsewhere then you may already have used your personal allowance, so then it would be natural to take a dividend in your company without a salary.

Alternatively, if you don't have another job and it is just that you hate NICs, and you just refuse to pay NICs at all costs then you could just pay a salary up to £5,000 per annum which is the new Secondary Threshold below which your company is not subject to Employer's NI. The threshold for Employees NICs is £12,570, so you would not incur Employees NI at the £5,000 level either.

One last point, you should check your National Insurance Record to make sure you would not miss out on certain benefits if you chose not to pay NI for any given year or more.

 

[Ziggy2024]

Hello everyone. Can you please tell me your thoughts about this question;

Suppose that I do not want to pay any type of NI (whether its contributions/deductions, or class 1,2,3,4), as the sole director of a company (no employees). I do not care about paying higher income tax, but I do not wish to make any payment related with NI.
Can I guarantee this by avoiding salary income, and paying myself dividends even if I receive high amount of dividend payments; lets say £500000 (made up number) per month ?

Thank you

Yes you absolutely can. I wonder what your logic is though? NIC is tax by another name, not paying one tax means your tax burden is just shifted to another tax.

 

[GLAbusiness]

Yes you absolutely can. I wonder what your logic is though? NIC is tax by another name, not paying one tax means your tax burden is just shifted to another tax.

I was going to say the same, but Ziggy said it better than I would have done

 

[Newchodge]

I think the question you are asking is a question I have often asked myself, and that is:

Am I compelled to pay myself a salary before I take a dividend?

Obviously, no you are not. Because dividends do not have any means of having such a requirement.

Conventional tax wisdom says that it is normally advantageous to take a salary up to the personal allowance before paying a dividend.

However, if, for example you are employed elsewhere then you may already have used your personal allowance, so then it would be natural to take a dividend in your company without a salary.

Alternatively, if you don't have another job and it is just that you hate NICs, and you just refuse to pay NICs at all costs then you could just pay a salary up to £5,000 per annum which is the new Secondary Threshold below which your company is not subject to Employer's NI. The threshold for Employees NICs is £12,570, so you would not incur Employees NI at the £5,000 level either.

One last point, you should check your National Insurance Record to make sure you would not miss out on certain benefits if you chose not to pay NI for any given year or more.

While the threshold slary at which employers must pay NI is £5,000, the threshold at which employees receive credits towards state benefits and the state pension is £6,504. May I ask why you are so anti NI contributions?

 

[DWS]

Everyone seems to have missed the point that Director’s are not entitled to Dividends only Shareholders are, and there is no mention of being a Shareholder in the OP

 

[MyAccountantOnline]

.....

Suppose that I do not want to pay any type of NI (whether its contributions/deductions, or class 1,2,3,4), as the sole director of a company...
Can I guarantee this by avoiding salary income, and paying myself dividends...

Yes if you are also a shareholder.

Whether it's wise or tax efficient is another matter.

 

[Elliot Green]

Everyone seems to have missed the point that Director’s are not entitled to Dividends only Shareholders are, and there is no mention of being a Shareholder in the OP

Chances are the OP is a shareholder, otherwise, there would typically be no suggestion of the OP "paying myself dividends".

Whilst that might be wrong, it is nevertheless no great leap. A notable feature of this forum is from time to time having to engage in reasonable speculation as to the unknown facts.

 

[Ziggy2024]

Everyone seems to have missed the point that Director’s are not entitled to Dividends only Shareholders are, and there is no mention of being a Shareholder in the OP

No I didn't miss that. I did make an assumption that sole director with no employees equalled an owner managed business. If someone has the level of control to avoid paying NIC then it's a reasonable assumption.

 

[Daybooks]

If you want to avoid all forms of national insurance contributions then you need to avoid making any payment that attracts them or generating profits that attract them.

There is class 1A and 1B to consider as well as understanding how and when they are incurred.