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New Tax Free Allowance
Newsletter issue - January 2013.
The standard personal allowance (amount of tax-free income) for 2013/14 will be £9,440. We had been expecting a smaller increase to £9,205.
The new higher allowance allows an individual to earn £181.54 per week (about £787 per month) tax free. But the NIC thresholds will not increase by as much, so an employee starts to pay NICs on income way below the tax-free threshold.
In 2013/14 the class 1 primary NI earnings threshold for employees will be £149 per week (£7755 per year). Employers will pay class 1 NI on wages of £148 or more per week (£7700 per year). You need to consider the NI costs for both you and your company when deciding how much you can extract from your own company as salary.
If you pay yourself the full personal allowance of £9,440 as salary from 6 April 2013, you will have personal NIC of £202.20 (12% x (9440-7755)) for the year. Your company will also pay £240.12 (13.8% x (9440-7700)) in class 1 NICs. However, the salary and NIC cost is fully tax allowable for the company.
A salary of £7,695 per year (about £147.98 per week) will avoid both employees and employers NICs. But you will get an NI credit for state retirement pension purposes if your salary lies in the range £109 to £149 per week. Unfortunately under RTI (see above), payments of salary in that range will have to be reported to HMRC, so there is no admin saving on paying a low salary.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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