Directors+ Package

By processing a minimum salary of £6,500 per year under PAYE, you maintain your entitlement to the maximum state pension. If your salary has been processed under PAYE, the net amount due can be credited to your director’s loan account until you are able to pay yourself. An annual salary of £6,500 attracts no Employees’ NI and no tax unless you have other employment. Provided it is processed through PAYE, it will count as a deductible company expense and reduce your company’s profits for corporation tax purposes even if left in the company. If your company can claim the Employment Allowance, which rises to a possible £10,500 per year, you will not have to pay any Employers’ NI. Without EA, Employers’ NI is just under £5 per week, or £225 per year, but even then you save at least £1,277 in corporation tax once your company generates profit.

The Employment Allowance reduces Employers’ NI liability by up to £10,500. Employees pay their own tax and NI under PAYE, but employers pay gross salary plus Class 1A NI of 15% on all salaries above £5,000. The first £10,500 of Employers’ NI is reduced to nil. This is a relief created to support small businesses. A company employing only one director is not entitled to this relief, but if a director plus one other person is employed, and the other employee earns over the £5,000 Secondary Threshold, the company qualifies.

Sharing company duties with a spouse or dependant is one of the most effective tax strategies for directors. The work must be genuine and the pay rate commercially justifiable, but it does not have to be full time. Less than 10 hours a week may be enough. With inflation and wage rates rising, reaching the £5,000 Secondary Threshold is easier than before, and if the spouse or dependant earns £6,500, they also secure their own State Pension qualifying year.

Yes. Being a director alone does not entitle someone to wages; HMRC requires that salaries are wholly and exclusively for business purposes (Corporation Tax Act 2009, s54). If one spouse or dependant is paid without doing real work, HMRC can disallow the deduction, reclassify the payment as a dividend, or even challenge the company’s claim to the Employment Allowance.

The PAYE year runs from 6th April of one year to the 5th April of the next year, regardless of your company’s accounting year end. If you incorporate on 5 May 2025, your first company year end will be 31 May 2026, but PAYE reporting will still run to 5 April 2026. This creates complications for director-owners who are trying to use allowances effectively, which is why registering for PAYE through Directors+ is important.

Yes. Employees have tax deductions that are cumulative throughout the year, while their NI is based on weekly or monthly thresholds. Directors’ NI, however, is calculated annually. This smooths out or eliminates the stop-start effect that directors see with variable salaries or bonuses.

Almost always, yes, unless you are overseas or your personal tax allowances are fully used elsewhere. Dividends are not deductible for corporation tax, they do not secure pension entitlement, and they do not count as relevant earnings for private pension contributions. With the £10,500 Employment Allowance and the 26% marginal corporation tax band, PAYE is in most cases the more efficient choice (salary vs dividend blog ›).

If all duties are performed outside the UK, no PAYE applies. If some duties are carried out in the UK, then UK tax and NI may apply to part of the income. Double taxation treaties distinguish between salary and directors’ fees, and while this is rarely an issue for small companies, mixed duties may trigger PAYE.

Once you appoint us, we register your company for PAYE as authorised HMRC agents. We will ask you for your National Insurance number and then make an application to HMRC to register your newly formed company for PAYE. The process will take about two weeks.

Yes. The package covers two people, either two directors or one director and one employee. You can add further employees at £21 each in the first year and £28 each per year thereafter, up to a total of five people. Beyond that, payroll is moved to our bureau service, which starts at £18 per month plus £2.50 per additional payslip after the first five each month (payroll bureau services ›).

Minimum wage does not apply to directors, but it does apply to all other employees, including spouses and dependants. Employers are not required to issue a full employment contract, but they must provide a written statement of main terms to each employee or worker.

No. PAYE registration alone does not increase reporting obligations. If your company provides benefits-in-kind such as loans, company cars, or memberships, these must be reported annually on a P11D, but this obligation exists whether or not you operate PAYE.