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Intuit

Director's National Insurance in PaySuite

Directors National Insurance
Once an employee is created in payroll, you would need to specify if they are a director along with their appointed start date.

In PaySuite, we support the annual/cumulative method for directors.

How it is calculated?
The annual calculation method calculates the national insurance liability when processing each payroll run and is based on the employee's NI'able pay to date using the annual thresholds which are used no matter the pay frequency used on the payroll.

The annual calculation method ensures that the director is up to date with their National Insurance contributions when the payroll run is completed.

The annual earnings threshold for 2018/9:
LEL = £6032.00
PT = £8424.00
UEL = £46350.00

The director can earn up to the annual primary threshold before they start paying national insurance contributions, so far for 2018/9 the Director can earn up to £8242.00 before being liable for National Insurance Contributions.

Proration of Directors National Insurance:
The Directors Appointment Date will determine the earnings threshold to be used when calculating the director's national insurance contributions, for example:

Mr A N Director joins the company as a director on 30th July 2018 which is tax week 17 of the new tax year, which means he is a director for 36 weeks of the tax year from tax week 17 to tax week 52.

His pro rata annual threshold are calculated as follows:

Pro Rata threshold = (annual threshold/52)* weeks remaining in the tax year

The value is rounded up to the nearest pound (if necessary)

Pro Rata annual earnings for Mr A N director:

LEL = £6032.00/52 * 36 = £4176.00
PT = £8424.00/52 * 36 = £5832.00
UEL = £46350.00/52 * 36 = £32089.00

Mr A N Director will become liable for National Insurance contributions once his NI'able pay to date exceeds £5832.00

Example of calculation:
The example calculation is based on director with appointment date of 01/01/2018, which means they have a directorship for the full tax year (52 weeks).

The director is paid £880.00 per month and based on this they are not liable to pay National Insurance contributions until month 10 of the tax year.

 Tax Month 1 2 3 4 5 6 7 8 9 10 11 12 Salary £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 £880.00 NI’able Pay to Date £880.00 £1760.00 £2640.00 £3520.00 £4400.00 £5280.00 £6160.00 £7040.00 £7920.00 £8800.00 £9680.00 £10560.00

The director has an NI letter A.

In Month 10, the directors calculation will look at the following:

NI'able Pay to Date = £ 8800.00 minus £8424.00 (PT) = £376.00 is subject to NI contributions.

Employee Contribution = £376.00 minus 12% = £45.12
Employer Contribution = £376.00 minus 13.8% = £51.89

The above shows what national insurance the employee & employer will pay in Month 10.

In Month 11, the directors calculation will look at the following:

NI'able Pay to Date = £ 9680.00 minus £8424.00 (PT) = £1256.00 is subject to NI contributions.

Employee Contribution = £1256.00 minus 12% = £150.72- £45.12 (EE NI paid to date)
Employer Contribution = £1256.00 minus 13.8% = £173.33-£51.89 (ER NI paid to date)

The above shows what national insurance the employee & employer will pay in Month 11.

In Month 12, the directors calculation will look at the following:

NI'able Pay to Date = £10560.00 minus £8424.00 (PT) = £2136.00 is subject to NI contributions.

Employee Contribution = £2136.00 minus 12% = £256.32- £150.72 (EE NI paid to date)
Employer Contribution = £2136.00 minus 13.8% = £294.77 - £173.33 (ER NI paid to date)

The above shows what national insurance the employee & employer will pay in Month 12.