Tax Planning Ideas - Reducing the costs of National Insurance

One area that often gets over looked when discussing tax savings and planning ideas is National Insurance. As we know National Insurance Contributions are on the rise and I expect them to continue to increase over the next 3 tax years. NI can be a major cost for a business and thus I thought I would share some simple tax tips to potentially lower this cost for you and your associates.

Dividends
The most common suggestion I make is to ensure that a Director takes a low salary and increases the amounts he takes in dividends. This will ensure one pays the marginal National Insurance Contributions and the rest is only subject to corporation tax at 20% with no additional NIC liabile. One thing to bear in mind is that if you are changing salaries for existing directors ou must ensure you have meeting notes on file with shareholders agreement and potential a revised contract of the new arrangement.

Pension Contribution
Another planning point can be to entering employees into a salary sacrifice pension scheme. This enables payments into the scheme to made from the gross pay. You must ensure inwrirting that the employee has given up part of his salary in favour of the company making a contribution.

Self Employment
A company can consider engaging individuals on a self employed basis rather than an employed contract. This is simply a matter of drafting appropriate contracts and terms and conditions.  The benefit is obvious as one would not pay employees/ers NI. The most important thing here is getting the contract right as HMRC often investigate this scenario

Share Incentive Schemes
Similar to the benefits under a salary sacrifice arrangement, an employer can set up this share scheme giving employees and option to purchase shares out of their gross pay and thus would not attract NI. The downside of this is that a trust must be set up and the shares must be held for five years to avoid further tax implications.

These are four very good, basic tips to give you and your associates ideas to reduce any National Insurance Costs.

As you know I am working hard to build my own client base so if you know of anyone who needs tax compliance work or advice please pass them my details

Thanks for reading and feel free to comment


Mitch the Tax Man

Helping Pensioners

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money

I love dealing with pensioners – This week I helped a pensioner client of mine by saving him over £120 a year in tax

The way that one pays tax on a State Pension depends on whether the individual is employed or not:

• if you're working, you'll pay tax through your employer's PAYE scheme depending on the amount you earn
• if you're not working, you'll need to pay tax through Self Assessment by completing a tax return

My client completes tax returns and has state pension income that he pays tax on but after checking the full breakdown of what made up the state pension I found out it included, attendance allowance and winter fuel payments which are not taxable and he has always been paying tax on it !!

I thereby requested a repayment of tax for him and saved him £120 a year moving forward. No doubt he was delighted and fully appreciated my thorough approach to his situation 

Furthermore if you are a pensioner who has income less than the personal allowance and you have income such as bank interest that is taxed at source we can claim that tax back for you

Thus this week I would love to review any tax affairs of pensioners who you may know as I am sure I can help them potentially save tax

That’s Mitch Young from Lerman Jacobs Davis, helping you and your business to count

mitch@ljd.uk.com