Tax Tips for Directors
- The National Insurance system works differently for directors. NI for directors is calculated
on a year to date basis, therefore a director can earn £5,715 (2010/11) before either the director or the company are due to
pay any NI.
- Directors are not usually subject to the minimum wage unless they have a contract of
employment with the company.
- If a director leaves an employment where NI has been calculated in the usual fashion, a NI
rebate may well be due.
- Directors have to pay tax on Benefits in Kind no matter how high or low their earnings (the
£8,500 lower limit does not apply to directors).
- The Directors Current Account is used to track how much is owed by the company to the
directors (or vice versa). Often when a company is formed the directors introduce cash or equipment to the business, the value
of which should be put into the directors current account for repayment.
- If the Company owes money to the directors it can be paid back without any tax being due (as
it is simply a repayment of a loan) and if appropriate should be repaid in advance of salary or dividends.
- If the Directors owe money to the company, repayment should be made within 9 months of the
year end, otherwise tax is due on the benefit of the loan.
- Shareholder/Directors should refer to the Limited Company Pages and in particular the Salary or Dividends Calculator which works out the tax savings available
by taking dividends in place of salary.
- Directors will usually benefit from also reading our Employee Tax Tips page.
