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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am the only director and employee of a limited company taking

Resolved Question:

I am the only director and employee of a limited company taking dividends and paying myself a minimal salary annually of £7696 to avoid paying NI contributions.
My company has just received a Statement of Liability from HMRC saying I owe £422.40 for underpayment of PAYE for the year 2013 -14.

Either HMRC have made an error, or more likely my understanding of NI is incorrect as I thought earnings below £7696 were not liable for NI.
1. Could you please explain how the £422.40 was calculated,
2. If I am liable, how little do I need to pay myself to avoid paying 'er and 'ee NI but still be eligible for state benefits in retirement.

Thank you
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

The Class 1 NIC threshold for tax year 2014-15 is £7,956 or £633 per month and the threshold for 2013-14 was £7,696 or £641 per month.

There must have been other income during the year chargeable to income tax and/or underpayment from previous year making this underpayment you have referred to.

Maybe, you should go back to HMRC and ask for detailed calculation of £422.40 they say is underpayment on PAYE for tax year 2013-14.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Thank you.


 


Does this threshold apply to both 'ee and 'er NI please.


 


No other income in previous years, all have been below the threshold and I have never had liability for paye before. This seems to have occurred from completing PAYE RTI.


 


 

Expert:  taxadvisor.uk replied 3 years ago.
Alan, thank you for your reply.

The figures quoted cover both employee and employer contribution.

Please look at Page 6 here for confirmation

http://www.hmrc.gov.uk/nitables/2013/ca38.pdf

I hope this is helpful and answers your question.

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