What can a director pay himself by way of tax-free expenses?
Examples include but are not limited to:
Mileage (but not commuting) for any business-related travel in own car
Use of home office, if the director works from home
Any ‘own pocket’ expenses incurred on behalf of the business
Childcare vouchers – eligible in certain circumstances
How much to pay?
It does depend on an individual’s personal circumstances, but generally, directors will pay themselves an annual wage equal to or slightly above the primary threshold for NICs.
2018/19 £162 a week, £702 a month and £8424 per year
…in 2014/15 – HMRC introduced the Employers Allowance which allows companies to claim back the first £2000 of Employers NICs. This was great news for employers as this meant that whilst the company was eligible to claim the Employers Allowance – it is more tax efficient for a director to pay himself up to the full tax-free allowance. The director will have to pay approx £204 in the tax year 2015/16 of employees NICs at a rate of 12% (£245 2014/15) but paying NIC’s at 12% is more tax effective than paying corporation tax at 19%.
2015/16 £204 a week, £883 a month or £10,600 a year
2016/17 £213 a week, £916 a month or £11,000 a year
2017/18 £221 a week, £958 a month or £11,500 a year
in 2016/17 – HMRC changed their minds!
HMRC decided to restrict the Employers Allowance to companies that employed more than one member of staff – small companies that have one director/employee are no longer eligible to claim the Employer Allowance which means that most single director/employee companies went back to paying the director an annual wage equal to or slightly above the primary threshold for NICs.
2017/18 £157 a week, £680 a month or £8160 a year