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HMRC issues new national insurance guidance for company directors

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Sarah Bradford summarises the special national insurance rules for company directors and sets out who is treated as a director for these purposes.

25th May 2021
Director Writetax Ltd
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HMRC recently published its 2021/22 edition of booklet CA44, National Insurance for company directors

Who is a company director?

A director is defined (in reg. 1 of the Social Security (Contributions) Regulations 2001 (SI 2001/1004)) as:

  • A member of a board or similar body where the company is managed by a board or similar body;
  • A single person where the company is managed by an individual.

The definition is extended to include a person under whose instructions a director as defined above is accustomed to act, but excludes anyone providing professional advice only when acting in a professional capacity (such as an accountant or a lawyer acting as such).

The need for the rules

National insurance contributions are normally calculated by reference to earnings paid only in that particular earnings period, using the thresholds appropriate to that earnings period (ie monthly thresholds for a monthly earnings period, weekly for a weekly earnings period, etc). No account is taken of earnings paid previously in the tax year.

As the liability on each pound of earnings is not the same, the way in which earnings are paid will affect the overall liability. Directors, particularly of personal and family companies, can determine how their remuneration is paid, making it possible to reduce their overall liability by manipulation of the earnings period rules, moving earnings from the 12% rate to the 2% rate.

Annual earnings period

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Replies (9)

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By Hugo Fair
25th May 2021 12:50

How is this an 'update' (as per article title)?
The NI thresholds are adjusted (as they are every year), but everything else is as it's been for donkey's years!

Thanks (12)
Replying to Hugo Fair:
blue sheep
By Nigel Henshaw
25th May 2021 15:37

Hugo Fair wrote:

How is this an 'update' (as per article title)?
The NI thresholds are adjusted (as they are every year), but everything else is as it's been for donkey's years!

precisely what I was thinking, what was the point of that article other than to waste a few minutes of my time!

Thanks (2)
panda ketteringUK
By ketteringUK
25th May 2021 18:11

Creating back links for SEO, putting name of her company. I think it's called the marketing.

But I agree, there is nothing new in this article and I wasted few minutes of my time too.

Thanks (3)
Replying to ketteringUK:
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By yorkshirepudding
26th May 2021 10:20

While the name of the company is added, the link to her company has rel="nofollow" which means it won't count as a back link. Of course, someone searching for WriteTax could find it through this page and the mention will count even if the link isn't crawled.

A useful description of how NI works for directors, but I was expecting a new method from the misleading title.

Thanks (0)
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By New To Accountancy
25th May 2021 22:42

I enjoyed it, especially the examples to confirm I have my thinking correct.
There are less experienced members on Aweb too.

Thanks (1)
Replying to New To Accountancy:
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By Paul Crowley
26th May 2021 13:03

Agree
What I think I know being confirmed is not a waste of time.

Thanks (1)
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By Homeworker
26th May 2021 09:58

Time wasted. Nothing new here.

Thanks (5)
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By JessicaRain
26th May 2021 11:53

*New* NI guidance? Clickbait. I'm putting the author and their company on notice.

Thanks (2)
Replying to JessicaRain:
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By ABHill
31st May 2021 12:15

But who writes the headline?

Thanks (0)