State pension and self-employed

freebetsfreetips

Sorry if this has been covered before, I may have even possibly asked myself! But just having a minor worry because it doesn't seem to make sense.

I'm a director of a limited company and own 50% of the business. We pay ourselves largely through dividends. Initially we didn't pay any NI, employer's or employees, as that was the most tax efficient way.

Since the government introduced some new NI scheme we increased our pay and now pay a small amount of employee's NI (for the last 3-4 years I think).

We currently pay a salary of £1041pm plus a quarterly dividend.

I was always told that even though we weren't paying NI we were still entitled to the state pension. Is that definitely correct? If so, can someone explain any sort of logic, just for my peace of mind?

Thanks in advance!

Dazed_and_confused

Where does self employment come into this?

And have you checked your State Pension forecast on gov.uk?

You can do this through your Personal Tax Account and it should show your current entitlement (below the headline figure), what you can get by State Pension age (the headline figure) and also have details of NI contributions for the years to 5 April 2018. 5 April 2019 if you're lucky.

JoeCrystal

Well, for peace of mind, I would suggest you check your NI record online at https://www.gov.uk/check-national-insurance-record to see if you do have them.

Generally speaking, if you earn between the Lower Earnings Limit and the Primary Threshold you will get National Insurance ‘credits’ – that is you will be entitled to some basic National Insurance benefits, but won’t actually pay any National Insurance. These limits are respectively £118 and £166 per week for 2019/20.

Prism

Firstly just to clarify, you are not self-employed which is important when discussing tax

To get credits for NI towards a state pension you need to be paid a salary of more than the Lower Earnings Limit (£512 per month for 2019/2020). You get the credit but don't actually pay NI until you reach the Primary/Secondary Threshold (£719 for 2019/2020). If you get paid more than that you start to pay NI as an employer and employee (25.8% total)

The ideal monthly salary to get all the NI benefits but not pay any NI is therefore £719 for this year. You can use the remainder of your personal allowance for dividends tax free.

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

freebetsfreetips

Our accountant deals with all of that stuff so I don't have access to the gateway or whatever but I'll see if they can give me the details.

Cheers.

Dazed_and_confused

You can sign up for a Personal Tax Account and look at in a few minutes, no need to involve your accountant in that at all.

Not sure they will even have access to your State Pension forecast/NI contribution details to be honest.

freebetsfreetips

Prism wrote: »

Firstly just to clarify, you are not self-employed which is important when discussing tax

To get credits for NI towards a state pension you need to be paid a salary of more than the Lower Earnings Limit (£512 per month for 2019/2020). You get the credit but don't actually pay NI until you reach the Primary/Secondary Threshold (£719 for 2019/2020). If you get paid more than that you start to pay NI as an employer and employee (25.8% total)

The ideal monthly salary to get all the NI benefits but not pay any NI is therefore £719 for this year. You can use the remainder of your personal allowance for dividends tax free.

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

OK, I suppose I'm not technically self-employed.

I know other people pay the £719 figure or similar but I think since the government introduced the £2000 employment allowance (https://www.gov.uk/government/publications/national-insurance-2000-employment-allowance) it is slightly better to pay a higher figure and also pay some employees NI? That's what our payroll person says anyway!

JoeCrystal

freebetsfreetips wrote: »

Our accountant deals with all of that stuff so I don't have access to the gateway or whatever but I'll see if they can give me the details.

Cheers.

But can you just log in for yourself? Your accountants would not be able to access your NI records after all.

Spreadsheetman

Dazed_and_confused wrote: »

You can sign up for a Personal Tax Account and look at in a few minutes, no need to involve your accountant in that at all.

Not sure they will even have access to your State Pension forecast/NI contribution details to be honest.

I doubt they would.

OP should sign up and log in to check - it's very easy.

A decent accountant should have been advising taking a salary level to ensure NI credits are accrued - it's basic stuff.

freebetsfreetips

OK, I'll try and register to access those records but our payroll has confirmed all is ok. I just wanted to triple check really. Not that the state pension will be here in 27 years!

Prism

freebetsfreetips wrote: »

I know other people pay the £719 figure or similar but I think since the government introduced the £2000 employment allowance (https://www.gov.uk/government/publications/national-insurance-2000-employment-allowance) it is slightly better to pay a higher figure and also pay some employees NI? That's what our payroll person says anyway!

Ah yes, I don't qualify for that but if you do it makes a small difference at the top end where you pay yourself the maximum of salary and dividends up to the 40% threshold. I think its worth about £300 a year. Personally pay myself a little lower than that and chuck the rest into my pension