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Get your Payroll questions answered by a QuickBooks Product Manager here - https://intuit.me/31Nl3My
ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

I am a contractor operating out of a limited company which I started in summer last year.  I've been paying myself a small salary each month with the intention of paying myself a bonus up to the NI threshold of £8788 for the 2020/21 tax year.  It is now March 2021 and when I tried to pay myself the bonus, the system deducted NI - both EE's and ER's.  My director calculation method is set to annual, starter declaration is set to B, NI letter is A, tax calculation method is cumulative, company director status is yes and tax code is 1250L. 

 

Anyone know why it would be doing this?

 

Many thanks.

20 REPLIES 20
Catherine_B
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Hello there, ChequeBookGerry.

 

The system calculates contributions and deductions depending on how you set them up. If you get money through your job like annual bonuses, you still have to pay tax on it and usually National Insurance too.

 

If the setup is correct while the calculation is incorrect, you can use the HMRC calculator. If you don't want taxes to be calculated, you can add it as earnings or additional pay type so it won't calculate taxes. 

 

I'd also suggest reaching out to an accountant so they can help you verify your setup according to your payroll preferences. Feel free to use these articles that will help you identify pay types: 

 

Let me know if you have other questions. Take care and have a great day!

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

Thanks for your response, however if I pay myself under the NI threshold then no NI should be deducted so clearly the system is doing something incorrect.

 

Kind regards.

GeorgiaC
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Hi ChequeBookGerry

 

I'd be grateful if you could cross-reference your payslip in Quickbooks with the HMRC Directors NI calculator linked here as these should match exactly.

 

If these don't math, can we check what month you began running payroll in QuickBooks for the 20/21 tax year? 

 

Please also verify any opening balances that may be contributing to your total year-to-date gross salary by going to Payroll > Employees > Click into employee listed > Scroll to Pay History and click to view opening figures.

 

 

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

The government calculator says no NI due.  I was paid from November 2020.  There is no opening balance as this is the only employment.

 

Many thanks.

 

Kind regards.

GeorgiaC
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Thanks for checking those ChequeBookGerry

 

Were you appointed as a Director as of November 2020? 

 

If you were appointed part way through the year, the full allowance of £8788.00 will be divided by the number of months you've been a Director, ie if you started in November, the allowance would be 8788/12*5= £3661.67 (rounded) as you would only be Director for 5 months in the 20/21 year.

 

Thanks 🙂

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

I would have thought it would have taken its baseline as me having no previous employment (as captured in the Starter Declaration) rather than anything to do with being a director, as it is the employment itself rather than the directorship that is the entitlement to a full year's NI threshold?  At the end of the day, for 2020/21, if I am paid less than £8788 from whatever source, then I pay no NI.

 

Kind regards.

 

 

GeorgiaC
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Thanks for getting back to me, on the annual method Directors appointed through the tax year have their NI calculated on a pro-rata basis for the remainder of that year, HMRC have full details on this here - please get back to us below if you have any further Q's. 🙇‍♀️

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

Yes, I aware of that.  They talk about a reassessment of total NI paid in the year happening at month 12, but this is not available in Quick Books.  Having looked just now, NI is still being charged.  Perhaps this is a bug in that the system is doing a simple pro rata allocation of the annual NI allowance throughout the part year rather than checking against the previous employment status flag and allocating the full allowance for the remaining year?

 

Kind regards.

 

 

GeorgiaC
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

The annualisation calculation takes place on the alternative method, this is used if you're generally paid the same amount on a monthly basis. Can we check what month have you entered as the appointment date within QuickBooks and the starter declaration against this? 

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

I am on the cumulative tax method, annual Director Calculation Method, appointment date of 12/08/2020 and start date of 01/11/2020.

 

Kind regards.

DivinaMercy_N
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Thanks for getting back here, @ChequeBookGerry.

 

If you have already checked the previous paychecks, I suggest reaching out to our Payroll support team so they can further review the checks. This way they can investigate the root cause of the issue and perform steps to fix it for you. Here's how:

  1. Go to the Help menu. 
  2. Select Contact us.
  3. From the What can we help you with? box, enter a brief description of your concern.
  4. Click Continue.
  5. You'll be routed into the Choose a way to connect with us page.
  6. Choose Get a callback or Start a chat.

 

You might also want to visit our help page to browse articles that can guide you with your QuickBooks tasks. To get started head to our QBO help articles at this link.

 

Feel free to post here again if you have other QuickBooks related concerns. I'll be around to help you in any way I can. Have a good one. 

userhelen-myles
Level 1

Payroll deducting NI on director's salary well under threshold

I have this problem too but your option to contact a human / live chat / call back merely routes me here.  This is really quite rubbish.  Urgently need help

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

Yes, the support is very poor and I really do think this is a bug.  If I say I've had no other income and this is my only job, it should accept my word for that and not go off taxing me as if I did.  The only way round this that I have seen to do it is to put it down as an expenses reimbursement, which won't attract tax or NI.  Not sure of the legality of it as strictly it would need to be on a P60 as taxable income, but as long as you declare the right amount on your tax return it should be OK.  I am considering firing myself on the 6th April and rehiring me right away, if I thought it would fix it for next year.

 

Best of luck with it.

 

 

GeorgiaC
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Hi userhelen-myles

 

We have responded to your query on your previous post, please see the reply and get back to us there so we can take a closer look. 

 

For support with QuickBooks Online, you can reach our care team on 0808 234 5337 (open weekdays 8am - 7pm, free from UK mobile & landline) or begin a direct chat here


Thanks 🙂

Steve808
Level 1

Payroll deducting NI on director's salary well under threshold

I Have encountered a similar problem. In my case we have two directors who elect monthly NI calculation method. When I ran the march payroll one of them was showing a refund on both employee & employers the other was a very low employee & refund employers. On checking via the HMRC calculator if the March deduction had been the same as Feb the total amount for the year would be correct !!!! (Feb was the same as all other months as salary the same for whole year). Spent time on help by 'messaging' obviously the QB agent did not know what to do eventually e-mailed stating she had contacted a product specialist & sent me a link to HMRC calculator & suggested I re -run the payroll - this I had already done !! I decided to untick that the two were directors & re run the payroll, this appears to have solved the issue, as the March deductions then matched Feb. I tried to discuss with an agent as I believe this to be a serious software error that needs to be rectified urgently by Quick Books. I decided to try the phone number above in this string, spoke to a guy who listened to what I told him I commented there maybe notes on the system re my earlier contact he said he would check then the call dropped out !  My confidence in QB has gone !!

 

Perhaps If there's no resolution In the next day or so I should escalate this to HMRC ?

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

Glad it is not just me.  It certainly does seem like a bug. Very disappointing that Quickbooks doesn't seem to understand that it is a bug, never mind want to fix it.   I'll try the unticking and see what that does. Thanks for that tip.

 

Kind regards.

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

I tried to run the last payroll of the year and the program was still taking deductions.  Tried to backdate my employment to 6/4/20 and make me not a director.  Useless.  In the end I just had to pay myself a massive expenses reimbursement to make up the shortfall and remember to declare it on my tax return.  Payroll is the only reason for using this software as we can all do our income and expenses on a free spreadsheet and so it's just rubbish.  Cannot recommend the product to anyone.

 

See what 2021/22 brings then...

 

Kind regards.

embo-deli-com
Level 1

Payroll deducting NI on director's salary well under threshold

Did you get any resolution for this? After running QB payroll for 4 years and successfully not paying NI on a directors wage, this year it's decided to deduct every pay run *sigh

spoke to an 'advisor' who really didn't get the problem and told me to check calculator aaarrrghhh

ChequeBookGerry
Level 2

Payroll deducting NI on director's salary well under threshold

Hi,

 

No, not at all.  QB don't even seem to understand the problem and certainly no clue about UK tax.

 

Kind regards.

KlentB
QuickBooks Team

Payroll deducting NI on director's salary well under threshold

Hi there, ChequeBookGerry and embo-deli-com.

 

I know that this hasn't been easy for both of you. Normally, the program shouldn't be deducting National Insurance on the director's salary under the annual earnings threshold (below £9,568).

 

To ensure that this will be taken care of as soon as possible, I'd recommend contacting our technical supports. This way, we'll be able to look into your account and payroll setup. Then, conduct an investigation to rectify the issue. Here's how:

 

  1. Go to the Help icon.
  2. Enter "Talk to a human" in the search bar.
  3. Select Contact a human, then click the Live Chat/Call me back link.
  4. Enter "QuickBooks deducting National Insurance on the director's salary under the annual earnings threshold." in the description box.
  5. Hit Let’s talk, then select your preferred support method.

In the meantime, you'll want to consider unticking the director and rerunning your payroll to correct the deductions.

 

I'm also adding this to learn more about how the NI deduction works: National Insurance for company directors.

 

If I can be of any additional assistance, please don't hesitate to leave a comment below. I'll always have your back.

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