If you’re a small business owner and sole director, you might have had a shock when you looked at your payroll recently.
You’ve paid yourself the same as last year, but now there’s an Employers’ National Insurance (NI) charge on your payslip even though there wasn’t before.
You haven’t done anything wrong, and you’re not imagining it. This is down to a change in the Employers’ National Insurance thresholds that took effect recently.
What’s Changed?
In previous years, many sole directors could pay themselves just enough to qualify for a state pension year (often called a “pension stamp”) without triggering Employers’ National Insurance.
That’s because the Employment Allowance, which can offset Employers’ National Insurance (NI), wasn’t available to sole directors with no other employees, but their salary level often sat below the NI threshold anyway.
This year, the thresholds have shifted. That means if you pay yourself enough to get your pension stamp, you may now also cross the line where Employers’ National Insurance (NI) becomes due. And because there’s no Employment Allowance for single-employee companies, the National Insurance (NI) bill will need to be paid.
What Can You Do About It?
Don’t panic! There are ways to plan around this, so you’re not caught off guard:
- Budget for the extra cost – Even though it’s not huge for most directors, it still adds up over the year.
- Review your salary/dividend split – You might be able to adjust how you pay yourself to reduce the impact.
- Factor it into your cash flow – This stops the charge from becoming an unpleasant surprise at payroll time.
Every business is different, so the best approach is to get personalised advice based on your full financial picture.
If you’ve noticed an Employers’ National Insurance (NI) charge on your payslip for the first time and want to understand your options, we can walk you through the numbers and help you plan in the most tax-efficient way.
Get in touch and let’s make sure your payroll works for you, not against you.
