Class 1 National Insurance contributions for directors

Are you a director and normally receive the same monthly salary and suddenly your net pay has changed  ? 

This is probably as a direct result of the way in which directors pay national insurance...

For National Insurance purposes, company directors are classed as 'officers' and like any other employee they are also liable for Class 1 National Insurance Contributions.

However employers must be aware that there are different rules for calculating National Insurance contributions for directors than employees.

Whilst employees' Class 1 National Insurance Contibutions are calculated on their individual monthly or weekly earnings separately, directors' NICs are calculated on an annual cumulative basis. This means that you need to make a new calculation each time a director is paid, calculating their NICs on the total earnings paid to date in the tax year, or pro-rata period, including any bonuses or fees.

You can make national insurance contributions in the same way as employees however certain criteria must be met. 

To find out more please contact us and we can explain the details to you.