Changes to NIC does it have any impact on the optimum Director's salary for tax and NI purposes?
If your a Director company our local Kettering accountant Simon Laskey has some advice for you.
With the change in the threshold for National Insurance on 6th July 2022, does it have any impact on the optimum Director's salary for tax and NI purposes?
Well, the starting point is a salary of £9,100 as at this level there is no PAYE, Employee's NIC or Employers NIC liability. Typically, a Director would draw this amount as a 'tax free' salary (subject to other income) and then top up their income with dividends at a lower rate. A salary at this level still 'stamps' your state pension record.
However, with the change in the NI threshold today it may be sensible to increase the salary amount to £11,908. A single Director company without any employees would be unable to offset the Employers NIC incurred - but, there is a marginal net tax saving if you consider the reduction in corporation tax.
A Director with employees and surplus Employment Allowance to be claimed could not only draw an increased salary and incur no additional tax/NIC cost but also reduce their corporation tax at the same time. Win, win, win.
Certainly, with the changes today there are tax planning decisions to be made...
If you need any advice from Simon please call him now on 01536 526427
Plus he is offering a free hours consultation at the moment.
