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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5112
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

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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
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.



Alan, thank you for your reply.

The figures quoted cover both employee and employer contribution.

Please look at Page 6 here for confirmation

I hope this is helpful and answers your question. and other Tax Specialists are ready to help you