Directors NICs

Rozzi Rainbow

Hi everyone

I thought PAYE was one of my stronger points but I really can't understand what Sage is doing here - hoping someone can help.

Director is paid £540 each month and pays £6.93 in employee NICs. NICs paid in first 11 months = £76.23.
In month 12, Sage recalculates the NICs on the year to date method. All fine up to here.

So after 12 months, the director has earned £6,480, but Sage calculates the annual liability for NICs (employee only) as £120.34, making a deduction of £44.11 due in month 12. Employer's NICs are also significantly higher than in previous months.

I would calculate the annual liabilty as (6,480-5,715) x 11% = £84.15 resulting in a deduction for month 12 of £7.92.

I really can't understand what is going on here, am I missing something or is Sage just being strange again! I can see me having to email them I think as last time I tried to ring them there was a 50 minute wait!

Thanks for any help.

Monsoon

I don't know the answer, I agree with your maths, but (assuming he's an owner-managed company director) why is he being paid £540? Why not pay £476.25 (£589 from next month) and avoid the NI?

Rozzi Rainbow

Cos she likes to see that she is paying some NI so she can satisfy herself that her pension etc is going to be ok and can prove if necessary that she has paid it. We have explained that she'll still qualify for her benefits at £476 a month but she's chosen to do it this way.

Monsoon

Rozzi Rainbow wrote: »

Cos she likes to see that she is paying some NI so she can satisfy herself that her pension etc is going to be ok and can prove if necessary that she has paid it. We have explained that she'll still qualify for her benefits at £476 a month but she's chosen to do it this way.

Fair enough! You can lead a horse to water......

Rozzi Rainbow

I've just had a brainwave - I think I've cracked this!

We first processed this payroll on 30th April 10 - her previous accountants did it last year. When I was checking all the YTD info looking to see what was going on, I think I saw Sage saying the directorship began on 30th April. Which isn't the case - she's been the director for years! So perhaps Sage is only giving her 11 and a bit months NI allowance, which would make the total NI nearer the £120 figure.

It just goes to show, you can't always believe everything your computer tells you! I wish there was a way of getting Sage to show you its calculations, I could've had this sorted much quicker.

I hope this works, I won't know now till I get in the office tomorrow morning.

Thanks for your input Monsoon.