Director of a Ltd company do not pay NI?

fpd_2

Hi,

I am a contractor and have been told by my accountants to pay myself the maximum I can in salary before I go over the tax threshold. This also counts somehow as me contributing towards National Insurance as well. So, basically I do not pay NI. Is this correct, as no one else I know does this or knows about it?

Thanks.

floopnoodle

I thought it was pay yourself just short of £8k a year (tax allowance) in salary then take the rest in dividends up to the ~£40k threshold.

Mojisola

Are you happy to do without the benefits you might need to claim in the future - https://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/IntroductiontoNationalInsurance/DG_190052

fpd_2

Yep that's what I've been told to do pretty much. I pay myself £624.00 a month salary, and then the rest in dividends, again not going over my £31,000 dividend threshold.

But my question is regarding the fact that I have been told not to pay NI. Is this correct?

floopnoodle

fpd wrote: »

Yep that's what I've been told to do pretty much. I pay myself £624.00 a month salary, and then the rest in dividends, again not going over my £31,000 dividend threshold.

But my question is regarding the fact that I have been told not to pay NI. Is this correct?

Direct.gov says:

If you're employed
If you're employed you pay Class 1 National Insurance contributions. The rates are:
if you earn more than £146 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £146 and £817

You earn £144 a week so don't have to pay it as far as I can see.

fpd_2

So, if I earn 624.00 salary then I don't have to pay it, but it still counts as a full contribution?

Hi Mijisola, yes as an employee of my company I get all these benefits when I am paid the salary, including the full state pension. But I do not physically pay any NI. This is my concern...

System

fpd wrote: »

Hi,

I am a contractor and have been told by my accountants to pay myself the maximum I can in salary before I go over the tax threshold. This also counts somehow as me contributing towards National Insurance as well. So, basically I do not pay NI. Is this correct, as no one else I know does this or knows about it?

Thanks.

Just remember that if you ever have to claim a benefit that relies on NI contributions then you've blown it

System

fpd wrote: »

Hi Mijisola, yes as an employee of my company I get all these benefits when I am paid the salary, including the full state pension. But I do not physically pay any NI. This is my concern...

See http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/Voluntarycontributionsandtoppingup/DG_190077

fpd_2

What sort of benefit would that be?

Notmyrealname

fpd wrote: »

What sort of benefit would that be?

Basic State Pension
Additional State Pension, sometimes called the State Second Pension
Contributions Based Jobseeker's Allowance
Contributions Based Employment and Support Allowance
Maternity Allowance
Bereavement Allowance, Bereavement Payment and Widowed Parent's Allowance
Incapacity Benefit

prowla

Dividends are not subject to NI.
That is what IR35 is about.