Employment Allowance & Directors Salaries 2015/16
Following the introduction of the Employment Allowance in April 2014, which allows most employers exemption on the first £2000 of employers NI, directors who were previously being paid what might be termed the ‘basic’ salary (£660 per month 2014/15, £670 per month 2015/16) can make a potential saving of £207 for 2015/16 per director by increasing their salary to £10,600 per annum (£883 per month).
It is important to consider that:
- It is not relevant when the Employment Allowance is already being fully claimed (for example the company has other employees earning enough to utilise it).
- It will be less relevant when the company has no profits, in order to get corporation tax relief on the extra salary in the year it is paid (though some relief may be obtained in future tears if the company becomes profitable).
- It is unlikely to be beneficial if the director has other income, such as rent or pensions, to utilise the extra personal allowance.
- It is unlikely to be beneficial if the director is a higher rate taxpayer, due to other income (such as dividends from the company).
- It will mean that a small payment is due to HMRC each month, which could otherwise be less likely, and will create additional administrative duties.
Each case is different depending on the personal or company circumstances. If you would like us to take a look at this for you then please give us a call on 01623 420 269.
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