The NI rates for next tax year were announced in the autumn and have increased by the usual inflationary amount, the attempt to consolidate the tax and NI systems seems to be on hold as tax and NI thresholds remain different:
- The personal tax free allowance is now £10,000 in line with the Lib Dem election promises
- The tax free NI allowance for employees is £7,956, so the suggested rate of pay for directors is just under this amount at £660pm
- Above this rate both employers and employees NI is payable, the rates having been brought in line this year rather than a few pounds per week different
- The rates for employees and employers above this are 12% and 13.8% respectively
- The employee rate reduces to 2% for earnings over £41.8k
For the self employed:
- The weekly Class 2 NI “stamp” is now £2.75pw
- Class 4 NI is also payable on profits over £7,956pa at a rate of 9%pa
- This rate reduces to 2% once profits reach £41,865
- Providing earnings are less than £5,885 the taxpayer can opt for a small earnings exemption and no Class 2 will be payable
The main point of interest for most clients will be the directors pay rate for 2014/15, this does only apply to directors as simple arithmetic will show this is well under the national minimum wage. This is based on our understanding of the rates for 2014/15 but may not apply to your situation so you should seek professional advice before taking any steps based on the contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”