Director of a Ltd company do not pay NI?

BigAunty

fpd wrote: »

Yeah IR35 try to suss out if what you are doing is 'disguised employment'. I am truly self-employed, and my books are pretty good too, so even if this was to happen, I'm sure I would be fine. Even with this, is seems too good to be true.

I got a state pension forecast and my years of self-employment where I paid minimal or low NI have been counted towards my pension.

I didn't know that I could get contributory ESA if I ever get sick in the future so that's news to me.

prowla

My recommendation would be to take a salary of something like £30k, and take anything over that as dividends.

It's not the most financially efficient, but you've covered the options.

FWDiane

Your accountant is probably talking about 'Directors Annual Earnings period' as special rules apply for working out NI for Company Directors. As an employee, as long as I earn above the NI lower earnings limit (currently £107 per week or £5564 pa) I will pay NI on a pro rata basis from month 1, whereas you, as a Company Director only start paying NI once you have earned over the lower earnings limit (so probably in month 8 or 9). At the end of the tax year we will have paid the same amount of NI (asuming the same salary) and that is why you are still eligible for the NI related benefits mentioned earlier. Hope that makes sense?

fpd_2

It's not well known but it is true. I wont have to pay NI after the year - I am exempt. Not sure how long this will go on for though, as it's not something that sounds right.

zagfles

Yes, if you earn between the lower earnings limit (£107pw) and primary threshold (£146pw) you get all the benefits of the NI stamp without actually paying anything!

Also you get credits for the earnings linked second state pension (ex SERPS) at the same level as if you earned about £14.5k.

Yes it is a stupid system, blame the last govt!

http://www.hmrc.gov.uk/rates/nic.htm

http://en.wikipedia.org/wiki/State_Second_Pension

KiKi

fpd wrote: »

It's not well known but it is true. I wont have to pay NI after the year - I am exempt. Not sure how long this will go on for though, as it's not something that sounds right.

Not well known? Who on earth told you that??!

This is very well known. It's standard practice for anyone owning a limited company, and why people in the 40% tax bracket are better off as Ltds rather than being a sole trader. Pay min wage, take the rest in dividends. I don't know any directors of limited companies who don't do this - esp if they're in the 20% tax bracket. Otherwise you get a double whammy - because, don't forget, you're still paying corporation tax.

KiKi

fpd_2

That was a very reassuring answer Kiki thanks. But I can assure you, until I got on this forum, and excluding my accountants, I couldn't find anyone that knew of this.