Limited companies and labour's autumn budget...

FFHillbilly

I haven't made my mind up yet, I'm simply gathering information. Don't really have to make a decision until April.
which other suggestions have I ignored? 
the idea for the administrator, I was under the impression both employees would need to be paid £5000 to get the employment allowance?

this is the quote from the HMRC website:

• a limited company with two or more directors, where only one of the directors earns above the secondary threshold for paying employers secondary class 1 NICs. The company is not eligible to claim the Employment Allowance.

Grumpy_chap

FFHillbilly said:

the idea for the administrator, I was under the impression both employees would need to be paid £5000 to get the employment allowance?

You may be correct, in which case I apologise for being incorrect.
Hopefully someone will comment to confirm either way.
I have put my previous understanding below so the two are together.

Grumpy_chap said:

 - assume the Ltd Co will pay you a salary of £12,570.
 - that will mean employer's NI of £1,135.
 - if the Ltd Co employed an Administrator for one day per month - perhaps to do the monthly accounts and payroll - and paid £97.68 per month (8 hours at NMW £12.21) that is £1,172.16
 - the Administrator will be subject to IT at their marginal rate - assume 20% so will pay £234 in tax
 - the Ltd Co will be able to reclaim the Employer's NI paid out (£1,135)
 - still an overall gain of £900

At least, that is how I understand it would work.  I am sure others will confirm, or advise if I am incorrect.

uknick

"Who cannot claim Employment Allowance

You cannot claim if you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) - unless you’re a charity.

You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance."

You can claim for a second employee, even if they're a director as well, as long as they earn above the required NI threshold, i.e. the company pays employer NI.

Grumpy_chap

Many thanks @uknick

That seems clear, the second employee would need to earn over £5k.  I took my information from another thread (now deleted) so may have understood or recalled that incorrectly.  It was @[Deleted User] I think that indicated in the other thread.

So, 
 - assume the Ltd Co will pay you a salary of £12,570.
 - that will mean employer's NI of £1,135.
 - if the Ltd Co employed an Administrator at part time salary of £5.5k per year
 - resulting NI for the Administrator £75
 - the Administrator will be subject to IT at their marginal rate - assume 20% so will pay £1,100 in tax
 - the Ltd Co will be able to reclaim the Employer's NI paid out (£1,135 + £75 = £1,210)
 - now a very slight gain of £100 or thereabouts.

Probably not worth doing of itself, but could be if the Administrator needs to accrue NI years and / or to pay employer's pension to the Administrator.

Bookworm105

Grumpy_chap said:

That seems clear, the second employee would need to earn over £5k.  

technically that is not quite correct.
For employees (not directors) NI applies to each pay run in isolation. Unlike income tax, it is not based on an annual threshold, it is instead based on the threshold applicable to the frequency of the pay run, ie weekly, monthly
See part 2 paras 2 - 9  The Social Security (Contributions) Regulations 2001

whilst I accept a salaried employee will have an annual income and be paid the same each month, many employees are paid by the hour worked, so have variable pay and may not earn the same total each year.

so an employer will incur and have to pay employers NI ("ER NI") when the employee is paid more than the "secondary threshold"):
weekly payroll: £175 per week (24/25) reduced to £96 (25/26)
monthly payroll: £758 per month (24/25) reduced to £416 (25/26)

If an employee earns more than the secondary threshold in any one payroll then the employer is entitled to claim employment allowance up to a total of £5,000 pa (24/25) or £10,500 (25/26). If total pay is less than the annual figures that does not mean employment allowance cannot be claimed, it depends solely on how much is paid each pay run. So perfectly possible to pay less than the annual amount and still have NI ER cleared in full by the employment allowance if the contract of employment means the person's annual pay will come in below that threshold (eg seasonal workers)

directors on the other hand are "annualised", meaning both employee and employer NI is triggered only when their cumulative pay for the tax year breaches the annualised secondary threshold £9,100 (24/25) or £5,000 (25/26). 

scenarios
If a company comprises one director then the employment allowance is not available irrespective of how much that director is paid 

if a company comprises 2 directors and no employees, then employment allowance can be claimed to offset the NI ER provided both earn above the secondary threshold

if a company comprises one director and one employee, then the employment allowance only can be claimed where the employee (not director) earns above the secondary threshold 

if a company comprises one director and one employee and both earn above the secondary threshold then the employment allowance can be claimed for both

Single-director companies and Employment Allowance: further guidance - GOV.UK