Am I right that a directors salary (or any salary), to keep it below paying NI and Tax should be £663 a month?
Have a client (company director) who has never taken a salary before, but would like to start now.
As we are in Month 2 should it be adjusted so she gets the £10000 for the year?
If you pay £663 per month (£7956 per year) there is no PAYE, EE NIC or ER NIC due.
If you pay £833 per month (£10k per year) there will be no PAYE (assuming have no other income) or ER NIC as below the £2k employers allowance. What they will pay is EE NIC at 12% on each £ above £7956 so will pay £245.28 (£2044 x 12%)
But you get 20% CT relief on the extra £2044 salary (assuming your taxable profits are high enough.) Saving of £408.80 (20% x £2044)
So therefore you are better of by 8% on the extra £2044 overall (£163.52).
You have to pay a bit of EE NIC £245.28 to get £408.80 CT saving and it just for the client to consider whether it worth the hassle of paying the £20k EE NIC each month.
It's also worth saying that if they are on the directors annual method of national insurance, the employees NI won't kick in until Januay 2015. Also, they will only need to make one payment as they can pay quarterly in April 2015.
If they are an employee, they will need to pay monthly.
