Underpaying Personal Allowance

[dmarshall]

Hi, I've been browsing this forum since before I started my business - it's fantastic! I finally wanted to post a quick question:

I'm the sole director of a small limited company, I expect to pay around £2k in tax for 2012-2013 and my accountant has advised me (the same as last year) to declare my salary roughly £800 below the income tax personal allowance for the period. I have no income or benefits coming in from anywhere else. I was wondering if this is common practice - or at least if anybody else does it?

 

[UK Contractor Accountant]

Class 1 National Insurance contributions kick in earlier than income tax that's probably why your Accountant suggested paying a salary roughly £800 less than the personal allowance.

 

[dmarshall]

Class 1 National Insurance contributions kick in earlier than income tax that's probably why your Accountant suggested paying a salary roughly £800 less than the personal allowance.

Thanks for your reply, that makes sense. Although from what I understand class 1 NIC begins at £7592 for the 2012-2013 period - I'm still shy of that by over £300. I just found it strange as I haven't heard of anybody else doing the same thing.

 

[UK Contractor Accountant]

employers ni (secondary) begins at £7488 for 2012/13. Employees ni begins at £7605 for 2012/13

 

[dmarshall]

employers ni (secondary) begins at £7488 for 2012/13. Employees ni begins at £7605 for 2012/13

Thanks again for your help. I'm declaring £200 below the secondary rate, but hopefully I'm safe to assume that's the reason it's been done.