Employers PAYE please help to explain

Doctordavies

I started a company with two friends in July this year. My accountant advised us to pay a low wage and pay ourselves dividends for the chunk of our earnings to save on tax.

We set up PAYE for the three directors and pay a salary of £1000 per month each and have been trading since June. My question is regarding the employers PAYE & NI due...

For the first three months the company was paying £276 in PAYE & NI contributions but I have just received the payslips for the next six months and the contributions rise from £276.00 through £627.99 then £990 per month until March 2010. Why do these figures rise so much? We are still paying ourselves £1000 each month and this figure has not changed yet the PAYE and NI figures rise 4 fold, can someone please explain why?

Many thanks.

HalfPint

I'd suggest you go back to your accountant adn ask them to explain the sudden rise...I'm no expert but from what you say it doesn't sound right..you should be able to pay yourself a set amount a month as a salary, pay the appropriate tax and ni on it...though you will have additional NI contributions to pay and obviously self assesment. Honestly sounds like something your accountant is best sorting out for you.

HP x

Doctordavies

I think I understand after further reading. We as a company pay the following..

11% employees NI
12.8% employers NI
Plus TAX

at the moment we are paying a salary of £1000 each per month and then the remainder of our wages with dividends. I assume that we can save ourselves more tax , buy paying ourselves a lower salary? ie the minimum amount which covers personal NI contributions??

What is this minimum figure for 09-10? And can I change our wages half way through the year?

Suewre

It is probably because directors national insurance is worked out differently than employees. You have a yearly NIC free allowance rather than a per pay period allowance (as directors wages can vary a lot). If you look at your first lot of payslips, you probably didn't pay any NICs, but you have now started to do so.