In this article
Director's can be set up for National Insurance on either the Standard method, or the Alternative method. Please ensure you have selected the correct method.
Standard Method
For Director's on the Standard method, NI is calculated cumulatively, with the annual allowance being applied upfront for the year, see below:
- No EE NICs will be due on cumulative earnings up to the Primary Threshold (PT) of £9,880
- Once cumulative earnings have exceeded the Primary Threshold of £9,880, 13.25% EE NICs will be due on earnings from £9,880.01 to £50,270 (the Upper Earnings Limit (UEL))
- Once cumulative earnings have exceeded the Upper Earnings Limit of £50,270, 3.25% EE NICs will be due on any remaining earnings
Example.
Director on the Standard Method earns £100,000 p/a (£8,333.33 p/m)
April Earnings: No NI will be due as the earnings are below the annual threshold of £9,880
May Earnings: The Director's cumulative earnings would be £16,666.67 (£8,333.33 x 2) therefore, 13.25% EE NI will be due on £6,786.67 of May's earnings (£16,666.67 - £9,880)
June Earnings: 13.25% EE NICs would be due
July Earnings: 13.25% EE NICs would be due
August Earnings: 13.25% EE NICs would be due
September Earnings: 13.25% EE NICs would be due
October Earnings: The Director's cumulative earnings would be £58,333.31 (£8,333.33 x 7) therefore, 13.25% EE NICs would be due on £270.02, & 3.35% EE NICs would be due on £8,063.31
November - March Earnings: 3.25% EE NICs would be due
Alternative Method
For Director's on the Alternative Method, the same thresholds are applied as per normal Employees i.e. NI is calculated non-cumulatively on earnings above the monthly Primary Threshold of £823, however NI is calculated cumulatively in Month 12 to ensure the correct NICs have been applied for the year.
How to Add a Company Director in Pento
First you will need to determine if the Director should be on the Standard or Alternative method for NI.
To set an Employee as Director, you will need to follow the steps below
- Go to the Employee list and click on the relevant Employee
- Under the Employee name, on the 'General' tab, you will see an option to Set as director
- Once you have selected this option, a modal will pop up
- You will need to set the date the Employee became a Director
- You will need to select either the Standard or Alternative method from the drop down box
- Select Set as Director
Click here for a short demonstration