Husband and Wife Directors Pensions

SomeMadeUpName

TWIGLET1234 said:

SomeMadeUpName said:

@TWIGLET1234 I have a similar position on one company, I think the Pensions Regulator will only write to you if you have a PAYE scheme running.  If they do you can just write explaining only 2no on PAYE and both directors, then you shouldn't need an auto enrol scheme (best off out of that if you can).

Pick a SIPP which accepts payments in from your company (most will I think but the only personal experience I have is Vanguard) you can then pay in up to £40k pa as covered by @Prism above.

Depending on how you have your drawings from the business set up (eg sub PAYE salary plus divi) it may be worth paying some into your SIPP from yourself too to get 25% uplift (but this has to come from you post tax money to get that).  The aggregate of personal and company pensions has to stay below £40k unless you have carry over (I think).

You probably have this covered, but remember having a PAYE scheme set up and then paying yourself enough sit just at the point you get NI credits but don't actually pay any NI is a way of adding years of SP entitlement for £0 cost.

Thanks, for this. We do have a PAYE scheme set up and my husband is paid £736 per month through it. Does he get NI credits on that?

I think your answer is yes.

I imagine it was a figure he researched (or was given) as it is the optimum.

dunstonh

Most accountants go to the Primary Threshold rather than the lower earnings limit.  Although it makes little difference if they went to the LEL.   It did help a tad for those that needed to utilise CJRS last year if they were on the PT rather than the LEL

SomeMadeUpName

dunstonh said:

Most accountants go to the Primary Threshold rather than the lower earnings limit.  Although it makes little difference if they went to the LEL.   It did help a tad for those that needed to utilise CJRS last year if they were on the PT rather than the LEL

Do they (go to PT), why, it means the company is paying employer NI. The norm sfaik is the ST. That's what I've used in the past, that's what the OP appears to have been advised to use, and that's what the article advises (not that any one article is definitive).

Anyway the answer to @TWIGLET1234's question is yes, her husband will get a qualifying year if he pays himself £736pcm.

Regards the CJRS, well in that instance it would have helped if you had been paying yourself £37.5k pa in 2019/20, but hey, who knew that! 

Marcon

dunstonh said:

Most accountants go to the Primary Threshold rather than the lower earnings limit.  Although it makes little difference if they went to the LEL.   It did help a tad for those that needed to utilise CJRS last year if they were on the PT rather than the LEL

Mine doesn't. See link in my previous reply, which confirms:

'If you earn between £120 and £184 a week, your contributions are treated as having been paid to protect your National Insurance record.'

Marcon

Mvpharos said:

Apologies for piggybacking on this thread but I think my question might be of some relevance to the OP too. I have a PSC of which my wife and I are directors and 50/50 shareholders. She doesn't do any work for the company so draws no salary however as a shareholder she receives 50% of the dividends. 

When it comes to pension contributions from the company, does the condition about being "reasonable and in keeping with the status etc" apply to her and therefore it would be inappropriate to make pension contributions to her from the company? Or does the fact that she's a named director and shareholder mean that pension contributions are pernitted? 

If she doesn't do any work for the company, the company can't pay pension contributions on her behalf.  She needs to be a bona fide PAYE employee.

dunstonh

Do they (go to PT), why, it means the company is paying employer NI.

Only those with employees.   In that case, it makes sense if they are paying more than the allowance.   However, in this case, we are talking no employees.  

anselld

dunstonh said:

Do they (go to PT), why, it means the company is paying employer NI.

Only those with employees.   In that case, it makes sense if they are paying more than the allowance.   However, in this case, we are talking no employees.  

Directors are also employees and would trigger employer NI if paid at the PT since the ST (where employers start paying) is currently less than the PT.  However this can be avoided by the business claiming employment allowance.

nick74

anselld said:

dunstonh said:

Do they (go to PT), why, it means the company is paying employer NI.

Only those with employees.   In that case, it makes sense if they are paying more than the allowance.   However, in this case, we are talking no employees.  

Directors are also employees and would trigger employer NI if paid at the PT since the ST (where employers start paying) is currently less than the PT.  However this can be avoided by the business claiming employment allowance.

Consider though that since April 2016 companies where the director is the only employee who is paid above the ST can no longer claim employment allowance. The change was brought in precisely to stop sole director companies taking advantage of this. As a result many small companies pay their director at the ST to avoid any employers NI. 

SomeMadeUpName

Marcon said:

Mvpharos said:

Apologies for piggybacking on this thread but I think my question might be of some relevance to the OP too. I have a PSC of which my wife and I are directors and 50/50 shareholders. She doesn't do any work for the company so draws no salary however as a shareholder she receives 50% of the dividends. 

When it comes to pension contributions from the company, does the condition about being "reasonable and in keeping with the status etc" apply to her and therefore it would be inappropriate to make pension contributions to her from the company? Or does the fact that she's a named director and shareholder mean that pension contributions are pernitted? 

If she doesn't do any work for the company, the company can't pay pension contributions on her behalf.  She needs to be a bona fide PAYE employee.

To be super super pedantic:

I don't think they have to be PAYE in the sense that there does not have to be a PAYE scheme.

For example.
If a semi-retired couple were running a small Ltd Co doing a bit of (very) part time consulting say.
They were the only employed workers, both directors and paying themselves only £5k a piece (as they had all the qualifying SP years they needed).
There would be no need for a PAYE scheme (below threshold) the salaries would just be recorded in the company accounts and on the couples SA returns.
It would be entirely reasonable and appropriate if they also paid a few grand each into pension from the company.
I'm not sure how much would be seen as acceptable (could you go all the way to £40k, funds allowing) maybe others have knowledge on that?
A few grand though (in proportion to the £5k salaries) would def be ok.

All the above is just my understanding, and I stand to be corrected. Indeed I would value it, if I am wrong.

As an aside, if this couple had savings outside of pension they might also be well advised to move £4k pa a piece over to their SIPP in order to get the £1k uplifts.

SomeMadeUpName

nick74 said:

anselld said:

dunstonh said:

Do they (go to PT), why, it means the company is paying employer NI.

Only those with employees.   In that case, it makes sense if they are paying more than the allowance.   However, in this case, we are talking no employees.  

Directors are also employees and would trigger employer NI if paid at the PT since the ST (where employers start paying) is currently less than the PT.  However this can be avoided by the business claiming employment allowance.

Consider though that since April 2016 companies where the director is the only employee who is paid above the ST can no longer claim employment allowance. The change was brought in precisely to stop sole director companies taking advantage of this. As a result many small companies pay their director at the ST to avoid any employers NI. 

The law of unintended consequence (and sharp eyed accountants), and the subsequent extra rules that this often brings about, are exactly why systems on tax, NI, IHT, CGT, pensions, etc all become so bewildering!