This is a general email to all clients concerning salary levels for directors for the 2014-15 tax year. This is complicated by the introduction of the £2000 annual Employment Allowance, which is a relief for Employers National Insurance. It follows that to obtain this full relief, you must be employing someone where Employers National Insurance is being paid at more than £2000. Since the objective in paying directors salaries has been to pitch it at a level that avoids paying any National Insurance, this introduces an additional complication. If there are other employees already paying Employers National Insurance of more than £2000, we are recommending that directors salaries are increased from the 2013-14 level of £641 up to £663 this year. The attached briefing note explains the reasoning for paying an annual salary of £7956, which equals £663 per month.
Where there are no employees or the employees are low earners where Employers National Insurance is not paid, then we are recommending that salaries for directors are increased to £833 per month. The additional £170 per month will have National Insurance deducted, which will cost another £245 per annum. This will need paying to HMRC as a fourth quarter payment in April 2015 and we will remind you at the time. The additional monthly salary will save Corporation Tax at 20%, totalling £408 for the year. The net saving is, therefore, £163 (£408 less £245).
For companies where there are employees, where total Employers National Insurance of less than £2000 is being paid, it may make sense to pay a directors salary of somewhere between £663 and £833. We will write to those directors separately with specific recommendations.
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