Director salary

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mike1983
mike1983 Registered Posts: 48 Regular contributor ⭐
in General accounting discussion
Good Morning
Re: A newly Incorporated Company
Say the new company's year end is 30 November 2014, this spans across two fiscal tax years (5th April 2014 an 5th April 2015).
If the director has no other earnings in tax year to 5th April 2014, can he take a full basic annual salary of £7,740 before then?
Also into the new tax year (2014/15) and before 30 November, can he the take another full annual basic salary to obtain maximum corporation tax relief.
He would then only take dividends between 1st December 2014 and 5th April 2015.

Thanks in advance.

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  • paulstafford
    paulstafford Registered Posts: 126 Dedicated contributor 🦉
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    Yes.
  • Rozzi Rainbow
    Rozzi Rainbow Registered Posts: 465 Dedicated contributor 🦉
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    I don't think it's quite as simple as that. The director can of course take as much salary as he wishes as long as it is procesed and reported correctly through the payroll, but I think you'll find he becomes liable to NICs (both Employee and Employer) if he does as you suggest. Director's NICs are assessed annually, but in the first tax year the "NIC free" amount is pro-rated to the period of directorship - so he won't get a full year's allowance and some of the £7,740 will be liable to NICs. In the second tax year, if you use the annual rather than monthly method of calculating Director's NICs then that should work as he won't be liable to NICs until his earnings for the year exceed the annual threshold, regardless of when in the year they are paid. You might find that he ends up paying a bit of tax though, as the tax allowances can't be accelerated forward, but he will get this back in later months when the nil salary is posted. ***Forum gripe - every time I've tried to put a new paragraph in this post the page has crashed and had to reload!!***

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