If you are a company director and are paying yourself a low salary and the balance in dividends as funds allow read on.  You are probably paying yourself £475 per month for 2010/11, this is greater than the NI Lower Earnings Limit (£97pw/£420pm) at which you build up state entitlements but below the Primary Threshold (£110pm/£476pm) at which point you start paying employee contributions of 11%.

If you read my last post you will know that the starting limits for both tax and NI are increasing and this will impact on how much you can draw tax free but still accrue state entitlements.  These changes are as follows for 2011/12:

Lower earnings limit:      £102pw / £442pm / £5,304pa

Primary Threshold:          £139pw / £602pm / £7,228pa

Secondary threshold:      £136pw / £589pm / £7,072pa

There is a quirk however, the point at which the company starts paying NI (the secondary threshold) is now £3 less than the point at which employees start paying NI.  So if you are currently paying yourself £475pm, you should be paying £589pm from 6 April, just below the secondary threshold (employers), providing nothing changes in the budget.

These facts are based on the current HMRC NI rates.  For specific advice relating to your circumstances seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”