{"id":5157,"date":"2016-06-10T16:16:34","date_gmt":"2016-06-10T15:16:34","guid":{"rendered":"https:\/\/www.qualityformations.co.uk\/blog\/?p=5157"},"modified":"2024-11-08T12:59:33","modified_gmt":"2024-11-08T12:59:33","slug":"tax-rates-allowance-limited-company-directors","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/tax-rates-allowance-limited-company-directors\/","title":{"rendered":"Tax rates and allowances for limited company directors"},"content":{"rendered":"
If you are a company director, it is important to be aware of Income Tax and National Insurance rates and thresholds, dividend tax requirements, and the way in which you can pay yourself through a limited company.<\/p>\n
Ideally, you should consult an accountant for professional advice and tax-saving strategies, but we\u2019ll provide a brief overview of tax rates and allowances to get you started.<\/p>\n
The tax rates and allowances stated in this article apply to the 2024\/25 tax year, which runs from 6th April 2024 to 5th April 2025.<\/p>\n
Directors of limited companies are usually also shareholders. In fact, many small startup companies are one-person operations, whereby the only person who owns, manages, and works for the company is the single director-shareholder-employee. Whatever the setup, the following tax rates and allowances may apply:<\/p>\n
As a company director, you are normally classed as an employee for tax purposes, so you will need to register your company as an employer<\/a> and operate Pay As You Earn (PAYE) as part of your payroll.<\/p>\n You will be required to pay Income Tax and Class 1 National Insurance contributions (NIC) through PAYE on the wages you receive from the company.<\/p>\n No tax or NIC will be due on the first \u00a312,570, which is your tax-free Personal Allowance<\/a> for the 2024\/25 tax year. Above that amount, you will start paying Income Tax and National Insurance on your earnings.<\/p>\n If you live in England, Wales, or Northern Ireland, you’ll pay the following Income Tax rates on your director’s salary:<\/p>\n If you live in Scotland, you’ll pay the Scottish Income Tax rates on your director’s salary:<\/p>\n The Personal Allowance is the same for everyone in the UK, regardless of which Income Tax rates you pay. However, your allowance will gradually reduce when you start earning more than \u00a3100,000 a year<\/a>, and you won’t receive any Personal Allowance if you earn over \u00a3125,140.<\/p>\n You will pay 8% Class 1 employee National Insurance<\/a> on wages between the primary threshold (\u00a312,570) and the upper earnings limit (\u00a350,270\/year). Above the upper earnings limit, you will pay 2% NIC. These deductions will be calculated and taken directly from your wages through PAYE.<\/p>\n The company will also have to pay 13.8% Class 1 employers’ National Insurance<\/a> on your earnings (and the wages of any other employees) above the secondary threshold (currenlty \u00a39,100 per year).<\/p>\n However, you may be eligible to claim up to \u00a35,000 Employment Allowance<\/a> on your employers’ National Insurance contributions if your company has more than one director and\/or employee.<\/p>\n\n
\n
Employee\u2019s National Insurance<\/h4>\n
Employer\u2019s National Insurance<\/h4>\n