Directors: Payroll & benefits

We specialize in payroll registration, monthly payroll runs, payroll maintenance, and payroll compliance.

As a business owner/ director, one of your most important tasks is ensuring that payroll is handled correctly. Indeed, employees expect their pay on time, and taxes must be accurate. Furthermore, payroll taxes change frequently, making payroll management challenging.

Our payroll services are specifically designed to help you spend less time managing payroll and more time focusing on the things that make your business grow. Whether you have an on-site accounting team or not, we can assist with some or all your payroll accounting needs.

Moreover, our services are fully tailored to meet your specific requirements, and they are suitable for organizations of any size—whether you have one employee or hundreds, and whether your payroll is run weekly or monthly.

Director payroll has specific requirements and rules

Directors' payroll is subject to specific rules and regulations under UK tax law. Here are the key points:

National Insurance Contributions (NIC) Earnings Periods:

Directors' NICs are calculated based on an annual earnings period. If a director is appointed or ceases to be a director during the tax year, the earnings period is adjusted accordingly. For example, if a director resigns, any earnings paid to them by the company before the end of that year are treated as director's earnings for the entire tax year or the remaining part of it E8.250 Directors' NIC earnings periods.

Timing of Earnings:

Directors are treated as having received earnings at the time they become entitled to be paid them. If the amount of a director’s earnings for a particular period is determined after the end of the period to which they relate, they are treated as being received and paid at the time the amount is determined. For instance, if a director’s fees for the year ended 31 December are fixed at an annual general meeting on 15 May of the following year, the date of payment is deemed to be 15 May  EIM42340 The Time When Earnings Are Received: Director's Earnings Fixed After The End Of The Period For Which They Are Due, EIM42300 The Time When Earnings Are Received: Entitlement To Director's Earnings.

Reporting Requirements:

Employers must report expenses and benefits provided to directors on Form P11D, which must be filed by 7 July following the end of the tax year. Additionally, a return on Form P11D(b) must be filed by 6 July if Class 1A NICs are payable. Failure to file these forms on time can result in penalties TC04475: BANRIAN CONSULTING LIMITED.

Blended Rates for NICs:

For the 2023 to 2024 tax year, directors' NICs are calculated using a blended rate due to changes in the primary percentage rates during the year. The blended rate is applied to the end-of-year reconciliation NIM01625 2023 To 2024 Tax Year Only.

These points outline the primary considerations for managing directors' payroll, ensuring compliance with NIC and tax reporting requirements.

Employment benefits

An "employment-related benefit" is defined as a benefit or facility of any kind provided in a tax year for an employee or a member of an employee's family or household by reason of the employment. This excludes any "excluded benefit" as defined in section 202 TC02753: APOLLO FUELS LTD AND OTHERS; BRIAN EDWARDS AND OTHERS.

A benefit provided by an employer is generally regarded as provided by reason of the employment unless the employer is an individual and the provision is made in the normal course of the employer's domestic, family, or personal relationships TC02753: APOLLO FUELS LTD AND OTHERS; BRIAN EDWARDS AND OTHERS.

For non-cash benefits, statutory valuation rules apply to value the benefit where it is not a straightforward payment of cash. This includes benefits provided by way of loan, making movable property available, or making land available. The legislation specifies a calculation of the benefit based on applying the official rate of interest to the underlying capital value for loans and movable property and based on the annual rental value for land Transfer of assets abroad code.

The taxable amount of a cash benefit is the amount received. Non-cash benefits provided after leaving employment are valued at the greater of the amount that would be chargeable as earnings if received by an employee resident in the UK for performance of the duties of an employment, and the cash equivalent of the benefit under the benefits code E4.802BB Loss of office, employment or earnings—scope of the charge.