From 6 April 2016 if you are the Sole Director with no staff you can no longer claim the Employment Allowance, now worth £3,000, this means there is no need to pay yourself a salary at a level that incurs a National Insurance cost.
So we are back to the easy salary decisions we used to have, and with national insurance limits remaining the same for 2016/2017 as they were in 2015/2016 the basic salary level remains the same as Option 3 referred to in our previous posting, namely £671.67 per month.
Remember, the reason for using this level of salary is to get a National Insurance Credit towards benefits such as state pension.
What if you employ staff, well then you can use a higher salary level if you like, your personal allowances are £11,000 before you pay tax, so if you wanted you could pay yourself £916.66 per month, but consider, if you have staff incurring more than £3,000 in Employers National Insurance is it still worth you taking a higher salary?
Now here is where it gets a bit ‘grey around the edges’, as the rules stand the employment allowance is not available for sole director companies, but, if the company has two working directors then it would appear they are not caught by the changes to the Employment Allowance, the key wording here is ‘working’, so if you are a husband and wife company with both spouses taking an active role, as it stands at the time of writing this, you are not caught and there is an advantage to taking the higher salary level.
As always, our T&C’s apply to this blog, and the above is not advice, as you should always seek professional advise before acting.