Limited company question

Aaron1974

Hi everyone, 

This is probably a daft question but I can't get my head around the budget announcement today.

My wife has been recommended by our accountant to take £700 per month (£8400 per year) to be tax efficient. Will she be able to take more per month after today? I've seen various figures mentioned. 

Many thanks in advance. 

Aaron

Dazed_and_C0nfused

Aaron1974 said:

Hi everyone, 

This is probably a daft question but I can't get my head around the budget announcement today.

My wife has been recommended by our accountant to take £700 per month (£8400 per year) to be tax efficient. Will she be able to take more per month after today? I've seen various figures mentioned. 

Many thanks in advance. 

Aaron

In what way is that tax efficient?

Not saying it isn't but you haven't provided any information what suggests it is tax efficient.

Jeremy535897

The changes come into effect from July 2022, but as they don't affect the level at which employers pay NIC, the figure to avoid paying NIC will remain at £8,840 (not £8,400).

Aaron1974

Thanks Jeremy, that makes sense.

p00hsticks

Dazed_and_C0nfused said:

Aaron1974 said:

Hi everyone, 

This is probably a daft question but I can't get my head around the budget announcement today.

My wife has been recommended by our accountant to take £700 per month (£8400 per year) to be tax efficient. Will she be able to take more per month after today? I've seen various figures mentioned. 

Many thanks in advance. 

Aaron

In what way is that tax efficient?

Assuming that the OP means £8840 a year rather than £8400, as Jeremy points out, then that's the LEL for NI contributions. Taking such a salary with s standard tax allowance means no NI or income tax to pay while still getting the necessary NI credit to build up a State Pension entitlement. Other income can be taken from the company as shareholder dividends. 

Jeremy535897

The LEL (lower earnings limit) is £120 a week, £6,240 a year. Pay lower than this means that the year does not count for pension purposes.

The secondary threshold is £170 a week, £8,840 a year. This is the maximum receivable where there is no NIC paid by either employer or employee.

The primary threshold is £184 a week, £9,568 a year. This is currently the maximum payable where there is no NIC payable by the employee. This figure is the figure affected by the Chancellor's Spring statement.

seatbeltnoob

Aaron1974 said:

Hi everyone, 

This is probably a daft question but I can't get my head around the budget announcement today.

My wife has been recommended by our accountant to take £700 per month (£8400 per year) to be tax efficient. Will she be able to take more per month after today? I've seen various figures mentioned. 

Many thanks in advance. 

Aaron

Yes,

From April, she can pay herself up to the new limit which is the same as the tax free allowance as the NI and income tax amounts are the same.

Employers contributions are still the same though, but most small business with an ordinary employee (with the director) can get first £4000 employers NIC effectively cancelled. 

Check if the company qualifies for employment allowance and can get the employers NICs discounted for the first £4K

https://www.gov.uk/claim-employment-allowance

you need to have an additional employee in the business other than the director to qualify for it.

Jeremy535897

seatbeltnoob said:

Aaron1974 said:

Hi everyone, 

This is probably a daft question but I can't get my head around the budget announcement today.

My wife has been recommended by our accountant to take £700 per month (£8400 per year) to be tax efficient. Will she be able to take more per month after today? I've seen various figures mentioned. 

Many thanks in advance. 

Aaron

Yes,

From April, she can pay herself up to the new limit which is the same as the tax free allowance as the NI and income tax amounts are the same.

Employers contributions are still the same though, but most small business with an ordinary employee (with the director) can get first £4000 employers NIC effectively cancelled. 

Check if the company qualifies for employment allowance and can get the employers NICs discounted for the first £4K

https://www.gov.uk/claim-employment-allowance

you need to have an additional employee in the business other than the director to qualify for it.

I would assume that this condition is not met, otherwise the accountant would not have given the advice they did, but I guess it is conceivable. See https://www.gov.uk/claim-employment-allowance/eligibility

The Spring Statement NIC primary threshold increase does not take effect until July 2022.

The employment allowance will be increased to £5,000 from April 2022.

Grumpy_chap

I understood that the employment allowance is not available for single owner single director LTD where the owner and director are one and the same.  I may be incorrect and sure someone will advise if so.

Jeremy535897

Grumpy_chap said:

I understood that the employment allowance is not available for single owner single director LTD where the owner and director are one and the same.  I may be incorrect and sure someone will advise if so.

The rule is set out in the link I provided:

"You also cannot claim if both of the following apply:

• you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold
• the employee is also a director of the company"

Grumpy_chap

Thanks Jeremy..
Likely the OP cannot avail of employment allowance.