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Where Taxpayers and Advisers Meet

PAYE and NI

smiling
Posts: 9
Joined: Mon May 11, 2009 9:16 am

PAYE and NI

Postby smiling » Thu Mar 17, 2016 7:52 am

Hi!

I have my own company and we are two employees. Let's say with the new tax year I want to give me a salary of the full allowance of 11K over the first two months and then nothing for the rest of the year for a number of reasons. How much NI would I get to pay? I am aware it is not the optimal solution but I would have such need.

Thanks

bd6759
Posts: 3094
Joined: Sat Feb 01, 2014 3:26 pm

Re: PAYE and NI

Postby bd6759 » Thu Mar 17, 2016 8:44 am

If you paid yourself £5500 in each of the first two months, the PAYE system would require you to deduct tax of £1300 and NIC of £388 each month.

If you were to ignore PAYE you would pay no tax and £353 NIC.

RMC
Posts: 431
Joined: Wed Aug 06, 2008 3:35 pm

Re: PAYE and NI

Postby RMC » Thu Mar 17, 2016 10:24 am

Sorry, typing error above:
As you are paid on annual basis, assuming PAYE code 1100L (do check this!!), there would be NIC liability only:
Employee NIC – (11000 – 8060) @ 12%
Employer NIC – (11000 – 8112) @ 13.8%
Your Basic PAYE Tools or other payroll software will work it out for you, if properly set up.

RTI reporting should be done on or before you receive, or become entitled to, a payment.

We are probably talking about 2 directors, so the National Minimum or Living Wage does not apply.

robbob
Posts: 2807
Joined: Wed Aug 06, 2008 4:01 pm

Re: PAYE and NI

Postby robbob » Thu Mar 17, 2016 10:31 am

As you are paid on annual basis,
Note an annual scheme would need to be registered with hmrc and from memory i think this would need to apply for all employees but it probably is the best option if it suits you to extract the salary early in the tax year.


https://www.gov.uk/running-payroll/changing-paydays


Annual payroll scheme for PAYE
If you pay your employees only once a year, and all in the same tax month, you can register with HMRC as an ‘annual scheme’.

This means you send reports and make payments to HMRC annually. If you pay your employees on different days in the same tax month, you need to send an FPS on or before each payday. You don’t need to send an Employer Payment Summary (EPS) for the months when you don’t pay your employees.

To register, contact HMRC’s payment enquiry helpline and tell them which month you pay your employees. You’ll need your 13-character Accounts Office reference number - this is on the letter HMRC sent you when you registered as an employer.

smiling
Posts: 9
Joined: Mon May 11, 2009 9:16 am

Re: PAYE and NI

Postby smiling » Thu Mar 17, 2016 10:42 am

If you paid yourself £5500 in each of the first two months, the PAYE system would require you to deduct tax of £1300 and NIC of £388 each month.

If you were to ignore PAYE you would pay no tax and £353 NIC.
I am currently on a monthly basis and not on an annual basis.
What do you mean by "ignore the PAYE"?

I can confirm I am currently on 1060L.
So if one expects only to pay a big salary all at once or in 2 months, I understand it would be best than to either move to an annual payment and do it for example in May so that only NIC is due, or "ignore the PAYE" (which I don't know what it does imply), or alternative as both of us are also self-employed to invoice the company for that amount and pay contributions as self-employed perhaps?

The director is one the other is not.

RMC
Posts: 431
Joined: Wed Aug 06, 2008 3:35 pm

Re: PAYE and NI

Postby RMC » Thu Mar 17, 2016 1:01 pm

When setting up his employee record on BPT or whatever software he is using the querist should select Pay Frequency: Annual. This will result in his PAYE computations on annual basis. No need to inform HMRC and more flexible than annual payroll scheme.
Whatever he does, it seems unlikely that he will master RTI reporting and should employ an accountant. Or close down the company and go self-employed.

smiling
Posts: 9
Joined: Mon May 11, 2009 9:16 am

Re: PAYE and NI

Postby smiling » Thu Mar 31, 2016 7:19 am

One is a director and one isn't.
If we were to pay as annual paye scheme for everyone say in May and then one of the employees would stop working for the company, would there be problems? As in - would the payment be considered a lump sum for the period or for tax purposes would just be considered as if it were earned over 12 months?


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