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For 2015/16 no employer’s National Insurance is payable on an employee’s (or director’s) earnings where the employee is under the age of 21 until the employee’s earnings exceed £815 per week (the employer’s upper secondary threshold for under 21s).

This means that where the director or employee is under 21 (for example, in a family company, maybe one or more of the director’s children), the optimal salary for 2015/16 is equivalent to the personal allowance of £10,600 (assuming that this is not utilised elsewhere). It does not matter whether the employment allowance is available or not.

Note – care should be taken that the salary paid to the family member reflects the work done to preserve the corporation tax deduction.

Example:
The Brown family run their own family company, Brown Ltd. Mr Brown is the sole director. His wife and daughter Charlotte, who is 19, are employed part-time by the company. He also employs a number of other employees and the employment allowance is fully utilised.

As his daughter Charlotte is under 21, it is beneficial to the family to pay her a salary of £10,600 (as in Tip 66) as no employer’s National Insurance is payable as her earnings are below the upper secondary threshold for 21s (£42,385 per year).