Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Better to pay £833.33 per month or £10k per year. Wont pay any PAYE or ER NIC (given the £2k employment allowance)
Would pay EE NIC at 12% on £2044 ie £245.28. (amount above the free allowance of £663 x 12)
But would get CT relief at 20% on extra £2044 ie 408.80
So overall better off by £163.52.
If director, will be on annual basis so wont need to pay the EE NIC until month 10.
Other option is to pay £663 per month then review in March next year and then put a one off bonus to mop up the extra £2044 if thats what they want to do. May not be the best option depending on what their year end is.
Also depends on other factors such as; do they have sufficient taxable profits to get the CT tax relief. Does the employee have other income that would then make the extra taxable.
Not a one size fits all and depends on individual circumstances but I am giving clients 3 choices
1. £663 per month - no tax or NI due
2. £833.33 per month - bit of EE NIC but better off about £160 overall due to CT relief
3. £663 per month and then if want put through £2044 bonus in March next year to use up CT relief.
Sorry to pick up on an old thread - Ive just set up a Limited company for my bookkeeping business and am the sole Director and sole employee. Would the company be able to claim the NI employment allowance and therefore allow me to pay myself at the £833.33 level, given its a service company?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Absolutely Jo. You need to claim it, normally via the software. I use Sage and it's just a few clicks of a button. Also assuming you are on a cumulative tax code you could play catch up since we are in month 6 now (just) and put through 6 months worth of salary.
Thanks Rob - thought I had read somewhere that service companies COULDNT claim it, and was going round in circles checking it out (and being distracted by finding out other things along the way. Yes I know - lost the plot (years ago!) I use Moneysoft and its a click of a button there too, although I now need to find out how to set up the 'cumulative' bit but Im sure that will be easy on there too.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi Jo, 'Service Companies' probably means something other than companies that supply services, maybe part of the IR35 nightmare, not that I'm aware of those being excluded, I'll go check that out as there are some omissions. 'Cumulative' as opposed to be being on a month 1 basis, so I guess you will be on a tax code of 1000L (without the 'week1/Month1' box being ticked)
