UK company directors are treated differently from other employees when it comes to National Insurance. This is because they are considered to be self-employed, even if they only work for one company. As a result, they have to pay National Insurance on their own behalf, rather than through their employer.
Types of National Insurance for Directors
There are two types of National Insurance that directors have to pay:
- Class 1 primary: This is paid on all earnings over £11,908 per year. The rate is 12%.
- Class 1 secondary: This is paid on all earnings over £9,568 per year. The rate is 13.8%.
Furthermore, directors can also choose to pay Class 3 National Insurance, which is a voluntary contribution. This can be useful if you want to build up your National Insurance record or qualify for certain benefits.
How to calculate Directors National Insurance
There are two methods of calculating directors’ National Insurance:
- The annual earnings period: This is the standard method used for calculating National Insurance. Your earnings for the whole year are added up and then the National Insurance rates are applied.
- The cumulative earnings period: This method is used if you want to pay National Insurance on your earnings as you go. You simply add up your earnings each pay period and then apply the National Insurance rates.
It’s important to note that you can only use the cumulative earnings period method if you’re a company director and you’re not also an employee of the company.
If you’re a company director, it’s important to be aware of your National Insurance obligations. By understanding how National Insurance works, you can make sure that you’re paying the right amount and that you’re building up your National Insurance record.
Conclusion and good to know
As a UK company director, you’ll need to pay both employee’s and employer’s national insurance contributions. The rates and methods of calculating your national insurance contributions will depend on your specific circumstances, such as your earnings or share of the company’s profits. Keep track of your national insurance obligations to ensure you’re paying the correct amount and avoiding any penalties.
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