Are you the director of your Limited Company? If so, then you must pay employers’ as well as employees’ National Insurance Contributions on salaries that your company pays out (which are above the NI threshold).
National Insurance Contributions are only payable on salaries, not dividends, so there are significant tax benefits to company directors taking dividends from profits, alongside a tax efficient salary. Of course, keep in mind that employees of your company will not be able to take dividends.
National Insurance rates for employees (2019/20)
Depending on the level of salary paid to yourself as a director, you may not actually pay any NI at all (if you pay yourself less than £166 per week).
Employees National Insurance Contributions
You will pay Class 1 NIC as an employee of your company. The current rate is 12% of earnings between £166 – £962 per week, and 2% on any earnings above £892 per week. This is paid monthly via payroll.
Employers’ National Insurance Contributions
Your company must also pay Class 1 NICs on employee salaries. The current rate is 13.8% on salaries at £166 or above per week.
Sold Trader National Insurance Contributions
If you are self employed as a sole trader, Class 1 NICs are not payable. Instead, you must pay Class 2 NICs, if your income is above £6,365 per year, at a rate of £3 per week.
Depending on your business profits, you may also be liable to pay Class 4 NICs. The current rates are 9% on profits between £8,632 and £50,000, and 2% for above £50,000.
Employment Allowance
As of April 2014, your business may be eligible to reclaim employers’ National Insurance Contributions up to £3,000 per annum, from HMRC.
Further Info
For advice on all things National Insurance related, it’s best to speak with your accountant and consult the HMRC website for the current rates.