The start of the new tax year (yes I know I am late) usually signifies that a director of their own company can have a small pay increase but not really for 2023/2024.
Income tax will be charged on the salary at £12570, so if you are minimising the tax to be paid, you would want to set the salary at that.
Class 1 National Insurace:
Class 1 National Insurance for a director is now also set at a threshold of £12570 and it is normally based on a cumulative basis so the director will only start to pay that when salary for the year goes over that amount.
But hey – that is OK because if we are only paying £12570 due to the income tax threshold, we are safe and won’t pay employees national insurance.
Result!
But be aware…
Now, here is the kicker – the employers’ national insurance threshold did not change, so your employer (well your own company) will start to pay 13.8% national insurance if your monthly salary goes over £758.33. It goes towards nothing, just into the Government coffers, so if you want to keep spending down, just pay yourselves the £758 a month and then dividends once a quarter.
Complex rules:
The landscape for Directors’ salaries and National Insurance in the UK is complex and can change from year to year. As a director, staying updated with these changes is crucial for both personal and business financial health.
Please note that this blog post is intended as a general guide and not specific financial advice. Always consult with a qualified financial advisor for advice tailored to your circumstances.
