National Insurance and Ltd Co.s

National Insurance and Ltd Co.s

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I have a situation where a small business recently set up do not currently pay themselves a salary , they have incurred expenses prior to becoming Ltd when they were self employed. The accountant had advised that the Ltd company effectively owes them this money back, so they can draw on this total for the time being. So, no salary is being operated at present and therefore no NIC being paid. What happens about this, even if a salary is to be paid it will be at the threshold so no tax or nic is due and the remainder taken as dividend. What happens to the NIc in this case?

Thanks
Michelle Wools

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By User deleted
12th Jan 2007 20:43

Salary of £4368 pa.
A salary of £4368 per annum should gain "nil rate" NIC's as a record for pension.

If a salary of this amount or more cannot be drawn the directors are into paying Class 3 NIC of £7.55 per week instead to gain credits.

Assuming that the directors have no other income or benefits in kind, then they should have a salary of at least the personal allowance (£5035).

The mechanism for getting the NIC's (nil rate) recorded is the P60 form, required where the salary is at a rate of £4368 pa [£364 per month] or more. To file the P60 with HMRC a PAYE scheme (and annual P35) is required. Both P35 and P60 can be filed in paper form or better online...

If the company has not got any other employees then I'd set up a PAYE scheme straightaway with a view to online filing and gaining the £150 Online Filing Incentive (OLFI). Completing a P60 (where required) qualifies for the OLFI.

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Lamb
By Rehan1
14th Jan 2007 12:33

Hi Mark

Could you explain the second last Para i-e The mechanism........

sorry i did not catch it properly ,may being blunt.

Kind Regards

Rehan

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By User deleted
15th Jan 2007 13:35

Mechanism for getting creditted with NICs
To clarify :

1) Have a PAYE scheme set up
2) Therefore have to complete P35 + P14/P60 forms

If a director's earnings are high enough (ie. £364 per month)
then box 1a on the P14/P60 will be need to be completed alongside (as well as specifying the NI table used, usually table A in most cases)

When the P14/P60 is processed by HMRC / Contribution Agency
in effect "nil rate" contributions are recorded for the person for whom the P14/P60 has been completed.

It's the entry in box 1a that generates the nil rate contributions.

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