Directors payroll – Useful information

16th March 2018 Nicky Cole
Directors payroll – Useful information

For the tax year 2018/2019 there has been a small increase to the national insurance limits and personal allowance and a decrease to the Dividend Allowance, which reduces to £2,000.  The information below explains the changes and we will need to be advised of the salary that you would like to receive, from April 2018.

Directors-payroll-maximising-cash-in-your-pocket

  1. From April 2018 you can pay a salary of £702/month (£8,424 per annum) without paying any tax or NI.

If you choose this option:

  • You will receive National Insurance Credits towards some benefits e.g. state pension
  • No income tax, or national insurance is due on a salary at this level
  • This is a perfectly legal and acceptable way of paying yourself from your company; in fact HMRC have been known to state that they do not have a problem with this approach
  • You can then take the rest of your personal allowance of £3,426 plus the dividend allowance of £2,000 without paying income tax (£11,850 personal allowance minus £8,424 = £3,426)
  1. The personal allowance has increased to £11,850.  To use this allowance, you can pay a salary of £987.50/month.

If you choose this option:

  • You do get National Insurance Credits
  • You will not pay income tax, however you will pay employee National Insurance of £411.12 for the year
  • There will also be employers national insurance of £479.64 for the year, due to HMRC not taking into account any Employment Allowance
  • You will still be able to take dividends of £2,000 with no dividend tax.
  • A salary is an allowable business expense which may reduce corporation tax.

There are two methods of paying National Insurance as a Director;

  1. The first is to pay it each month, based on the NI thresholds and pay rate known as the “table method”. This is what we recommend for Directors who take a regular
  2. The second method is to pay the NI only when the threshold of £8,424 has been reached, which usually occurs for the last 3-4 months of the tax year. This method is best for Directors that take an irregular

** We will always use the table method unless you tell us otherwise **

If you would like any further assistance, or advice on the best thing to do for you and your business, please don’t hesitate to contact us, we’re here to help!

*** Please ensure you advise us of the salary that you would like to take as a Director, starting from April 2018. ***