Potential Increase in Directors’ Pay
The new thresholds for national insurance contributions for 2012-13 have recently been published.
The weekly limit before employer’s contributions become payable has gone up from £136 per week to £144 per week. This means that directors (and other employees) can increase their pay from £7,072 per annum to £7,488 per annum (or from £589 per month to £624 per month) without having to pay any national insurance contributions.
Provided the pay exceeds £107 per week (£5,564 per annum or £464 per month) the year will count as a qualifying year for state retirement pension, even though no actual contributions have been paid.
The usual warning is given that the pay must be able to be commercially justified if the employer is to obtain a business tax deduction for it. This is particularly important where payment is made to a spouse who is not the main contributor to the business.
Make a note of this and, if appropriate, increase your pay with effect from 6 April 2012.
Copyright 2011 HB Accountants Amwell House, 19 Amwell Street, Hoddesdon, Hertfordshire, EN11 8TS