Directors NI calculations

[mjb1]

Following on from this thread: http://www.pistonheads.com/gassing/topic.asp?h=0&a... I was told by the PAYE help line that I could calculate and pay wages based on their online calculators. I can get their basic tools software to do the calculation (just not submit it), so I put in my pay details, as director, and it works out the income tax deduction fine, but the NI deductions show as zero. It doesn't seem to matter what monthly salary I input, always zero. I put in my partners wage details (who isn't a director), and it does show the NI deductions for her.

I always thought directors NI deductions were calculated cumulatively through the year even though it's overall done on an annual basis, with potentially a final 'correction' payment at year end? I tried putting several entries in for future monthly wage payments, but it still didn't start to show any NI deductions for me.

Should I believe this (I can only see it ending with a big outstanding amount at year end), or should I just use the regular employee deductions, as calculated by HMRC's online calculator tool?

[Eric Mc]

NI is calculated on a different basis for directors. A director pays NO NI until their accumulated salary breeches the NI threshold. By the end of the tax year, a director and an employee on a similar salary will have paid the same amount of NI.

[mjb1]

That makes sense now. Thanks Eric.

[essayer]

This confused me too. In the tax year it should start to show the deductions once you go over the primary threshold (£7956), then wind down once you go over the higher band (£41865)

Director NI contributions are treated annually to ensure you don't pay it all in one month - to balance out salary payments you can do it monthly provided you make sure you have paid the same NI as if you had calculated it annually.

[Eric Mc]

The rules make sense because a Director is a very different animal to a mere employee. Directors are in control of their company and, in theory anyway, are at liberty to vary their salary amounts as and how they see fit.

[sumo69]

This was introduced to stop directors paying themselves minimum salary for 11 months and 1 month of £££££ - a normal employee would only have 1/12 of the annual liability so this regularises the position.

David