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Director changing employer (within group) -

How to get the NI correct.

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A director is changing employment within a group of companies.

We use the annual method for calculating directors NI.

Does the director get 'another bite' at NI when moving to the second company - or is there a mechanism for treating them as one?

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By Hugo Fair
06th May 2021 18:20

There are several different ways to tackle this - none particularly simple (unless your payroll software handles what I'm about to point you at - and many packages do so fingers crossed).

You could 'cheat' by retaining the director on the original payroll until year-end (and doing inter-company charges within the group) ... but for most of the 'correct' solutions you'll need to get grips with the "Pro rata annual earnings period" concept that can be applied to calculation of Directors' NICs.

For an insight to this area, see https://assets.publishing.service.gov.uk/government/uploads/system/uploa... and go to pages 7-9

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By tom123
06th May 2021 20:30

Thanks Hugo,

That's my Friday reading sorted.

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RLI
By lionofludesch
06th May 2021 23:15

Tom, what exactly do you mean by the "annual method"? There are two methods and they're both annual.

One gives you the nil rate bit first, the other spreads it over the year, with an annual adjustment. They should both give the same answer.

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By Hugo Fair
06th May 2021 23:52

Yes they should (will) but on the assumption that either method is being applied to the whole tax year.

But there are additional rules for when a Director starts or stops employment during a tax year ... to do with pro-rating in essence.

As I said previously, many software packages can do this for you (if for instance you tick the Director's NI box and input start or end date became Director in year) ... but if not, the reference I gave is HMRC's guide to performing the calculation.

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By paul.benny
07th May 2021 08:44

Tom - when you talk of changing employment, at the risk of asking the obvious, does this actually mean changing payroll and PAYE scheme? And if so, why is director changing employer? Is it time to look at getting all staff into one entity and having a single payroll?

The answers aren't important here - I know you know what you're doing; sometimes we can get so caught up in detail that we miss some obvious things.

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By tom123
07th May 2021 10:26

Thanks all

1) With a bit of help from Moneysoft, (and the use of a 6th May start date) I can now see how the apportioning works.

2) Movement is part of a restructure, with a new scheme for this person only.
It makes sense for us for various commercial reasons.

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