NIC and qualifying year

[dickyred]

As a director of a company started in August 05 I want to minimise tax/NIC, and I am following the advice of this forum (pay PAYE/NIC at £4850 and top up with dividends) but, as I was drawing unemployment benefit for the period April to August and presumably my 'stamp' was credited during this time, how does this affect the earnings required to achieve a qualifying year for NIC purposes? Does it even matter?

[deanshepherd]

If you claimed benefits between April and August and are paying more than £82 per week from August to next April then that should constitute a full years NIC qualification.

It will count as a qualifying year for state pension purposes and keep your entitlement 'alive' for future benefits claims if necessary.


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk

[dickyred]

Thanks Dean

Can I pay myself £400 a month from August to February (£2,800) then top up my pay in March (£2,000)to fully use my allowance without paying NIC (directors' annual NIC rule)

[deanshepherd]

Not really. If you became a director during the year then the earnings period is pro-rated. In addition, your unemployment benefit is taxable so you will have to bear those figures in mind when paying yourself. You should have been issued with a P45 from the benefits agency which will be used when processing your company payroll.


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk

[dickyred]

The company was dormant for a few years until August 05, when trading began. I have been a director throughout the tax year. Does this make a difference to the pro-rated earnings period?

[deanshepherd]

Possibly, but then that may have affected your original entitlement to benefits if you are now saying you were actually working for the entire year.

Also, as your benefits are taxable you do not really want to exceed your personal allowance combined with your salary.


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk