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Salary for director

I have a sole director ltd company started in Oct 12. I did not earn any other income in the financial year. I intend to take a salary of £7440 from the company paid equally into 6 months of this financial year. Does this mean I wont have to pay tax or NI and get NI credit for the year ? 
 
Any advice appreciated.

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08th Jan 2013 12:29

What do you mean?

... by "financial year"?  The company's financial year to October 2013 (unless you have changed the accounting date) or the tax year to 5th April 2013?

The basis is that if you had paid £620 a month from April 2012 to March 2013, you will pay no NIC - either Employer's or Employee's - and, provided you don't have another job, no tax.  To obtain the NI credit, the company would have to register for PAYE and submit forms P35 & P14 for 2012/13 in April/May 2013.

However, the company did not exist until October 2012, so I assume that you mean paying yourself £1,240 a month from October 2012 to March 2013.  If so, the company will have to pay NIC, because the otherwise annual earnings period for directors is reduced pro rata for directors appointed during the tax year.  So, the company will be liable to pay Er's NIC when your cumulative pay exceeds about £3,744 (the annual secondary threshold of £7,448 x 6/12), which will be in January 2013.  The primary threshold for Ee's NIC is slightly higher, so you will only be deducting those when your cumulative pay exceeds £3,803 (£7,605 x 6/12), which again will be in January.

Tax depends on what you were doing from April to October 2012, but you will probably be liable to tax from the start in October 2012 as the monthly threshold is £675.

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By AT2013
14th Jan 2013 17:52

Hi Euan

Many thanks for your detailed reply.

Just to clarify, by financial year I mean the payroll year, is it always from April to march the next year (you cannot change it like company financial year ?)

does this prorata threshold you mentioned start from when the director is appointed or when the director is first paid ?

How do we check if we have got NI credit for the year ?

Many thanks

Anh

 

 

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