Directors Salary from April 2020
From 6 April 2020, we recommend directors take a monthly salary of £732.33. This salary ensures you receive a “qualifying year” of National Insurance Contributions towards your State Pension but without the need to pay any contributions. This salary is also below your Personal Allowance of £12,500 for tax purposes, which is not expected to change in the coming year.
Gov.uk outlines the steps for standard annual earnings for directors based on the frequency of payment:
Directors who are paid irregularly:
- Each time you pay a director, work out their National Insurance for their total pay over the tax year so far, including bonuses.
- To work out what contributions they now owe, take off the total employee National Insurance they’ve paid so far this year.
Directors who are paid regularly:
- Each time you pay a director, work out their National Insurance only on their pay for that period, including bonuses.
- At the end of the tax year, use payroll software to work out whether more employee National Insurance is due and deduct it from their last payment.
Contact Cardens to discuss
If you are taking a Directors salary you will need to submit “Real Time Information” (RTI) to HMRC. If you would like to discuss this in more detail, contact Cardens today and ask to speak to the Payroll team. Just give us a call on 01273 739 592 and ask to speak to the Payroll team.