Entitlement to Basic State Pension

Entitlement to Basic State Pension

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Hi All,

Just wondering if it is worth putting a directors salary through of £10,000 per annum, for a director that has already contributed the required 30 odd years NIC contributions which will entitle him to a basic state pension.

Thanks,

Mark

Replies (5)

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By GR
10th May 2014 09:30

do some calculations, e.g. ct saving, personal tax liability, etc, and find out

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By mhtax
10th May 2014 09:37

Qualifying years

Don't forget that the number of years is likely to increase in a couple of years to 35.

 

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By thomas34
10th May 2014 13:02

State Pension

Agree with both GR and mhtax.

Subject to the director's marginal rate of tax, one should in my opinion stick through either £7,956 or £10,000 purely for the not inconsiderable CT relief. Subject to the director having a 1000L tax code the £663 per month will keep both him/her and their employer out of tax and N.I. It may pay for the director's pay to be upped to £10,000 in month 12 in order to get some sort of benefit from the employer's £2,000 allowance.

I've yet to do the calculations but there would of course be a small personal liability in month 12 in order to get some "free" employer's N.I. and also further CT relief of 20% on £2,044.

It was suggested on a recent course I attended that once the 30 years had been achieved the sole director company should consider deregistering from PAYE registration (and RTI) to save the hassle - I don't agree with that action for the above reasons.

 

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Replying to Tim Vane:
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By taxhound
11th May 2014 07:55

Odd advice?

thomas34 wrote:

It was suggested on a recent course I attended that once the 30 years had been achieved the sole director company should consider deregistering from PAYE registration (and RTI) to save the hassle - I don't agree with that action for the above reasons.

 

If they are not using their personal allowance elsewhere, this course of action would waste tax and seems very strange blanket advice.  If they have other income, eg state pension or rental income, then I would agree.

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Replying to ASF:
blue sheep
By NH
11th May 2014 13:59

not so odd advice

taxhound wrote:

thomas34 wrote:

It was suggested on a recent course I attended that once the 30 years had been achieved the sole director company should consider deregistering from PAYE registration (and RTI) to save the hassle - I don't agree with that action for the above reasons.

 

If they are not using their personal allowance elsewhere, this course of action would waste tax and seems very strange blanket advice.  If they have other income, eg state pension or rental income, then I would agree.

I wouldnt say the advice is odd, if there is a salary at or below the NI threshold, there is no requirement for a PAYE scheme, but the tax savings can still be made on the salary.

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