How much NI Contributions are needed to get credit towards state pension

How much NI Contributions are needed to get...

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Client has just set up a Limited Company with himself and wife as Directors.

His wife has had no other income in this tax year to date.

What is the best way to get her the maximum amount of credits towards state pension for this tax year without paying any NI?

The LEL is just over 485 per month; so should she be paid 485 per month to year end or could she be paid more so as to get the maximum credit in 15/16 towards state pension without actually making any NI contributions?

When I put in a figure of 4367 (for the equivalent of 9 months pay at LEL) and then 485 per month to year end into Moneysoft Payroll she ends up making NI contributions.

Is there a way to get full credit this year without paying NI or is it too late?

Many thanks

Replies (8)

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RLI
By lionofludesch
16th Dec 2015 19:08

No

First - it looks like you've not told Moneysoft that she's a director,

Second - there's not enough information here.  It's generally accepted on here that the optimum salary is £10600 - but there are a number of factors to be considered.   Like whether either director has other income.

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By hje
16th Dec 2015 19:49

Seconded

as per lion, a non-cumulative Directors NI table needs to be utilised, aside from the choice of salary as above. This link might be of some interest: https://www.accountingweb.co.uk/anyanswers/question/moneysoft-directors-national-insurance

Edit: cumulative, not non-cumulative.

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By tonycourt
16th Dec 2015 19:23

Easy peasy

Set client up as director on Moneysoft then NI will be worked out cumulatively (not non-cumulative!).

The director needs annual earnings in excess of the LEL to receive a credit on their NI record. Any amount above the LEL will do. You will of course need to make sure that the income is reported through RTI.

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RLI
By lionofludesch
18th Dec 2015 09:29

Actually ....

.... just read that they just set up the company.

So, unfortunately, you can't get a full year in for 2015/16.  It'll be prorated to four months (or whatever).

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By anneaccountant
17th Dec 2015 08:53

Thanks for feedback

I have adjusted the start of the Directorship to August 2015; the payroll starts in December. The wife is set up as a Director in Moneysoft.

The annual LEL for NI is 5,832.

I don't seem to be able to arrange the last 4 months of the year to achieve no NI contributions for her but if I put in 1,458 per month (5,832 / 4) for December to March I get no NI contributions Dec to February and a small NI contribution of 86.04 in March.

So will paying her 1458 x 4 = 5,832 get her a full year's credit for certain state benefits (eg state pension)?

Is there any way to input the pay for the 4 months to avoid that 86.04 NI contribution in March?

Why is there an NI contribution for March when we are right on the LEL?

Many thanks

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Replying to Wilson Philips:
Red Leader
By Red Leader
17th Dec 2015 11:52

@Anne

anneaccountant wrote:

Is there any way to input the pay for the 4 months to avoid that 86.04 NI contribution in March?

Why is there an NI contribution for March when we are right on the LEL?

Many thanks

Moneysoft provides a calculation that you can review. Go to:

Pay / Pay Details / Click here for an explanation

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Replying to Wilson Philips:
RLI
By lionofludesch
18th Dec 2015 09:12

As I said eartlier

anneaccountant wrote:

a. Is there any way to input the pay for the 4 months to avoid that £86.04 NI contribution in March?

b. Why is there an NI contribution for March when we are right on the LEL?

Many thanks

a. No.

b. Because she was only a director for eight months so she only gets eight months' "allowance".

She's going to need to either write off this year or swallow the (modest) charge to NI.  Her decision, obviously.

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By craig preece
18th Dec 2015 10:04

Any kids?

If registered for Child Benefit she may be receiving Class 3 credits anyway that cover state pension, so if you are only doing this for state pension credits the NI may be unnecessary?

Alternatively, as she has no other income, it may be worth taking the 12% NI hit and paying a higher salary for 20% CT relief (assuming ERs NI covered by Employment Allowance)?

 

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