NINO for Company Directors in UK | Future Formations

NINO for Company Directors – explained

Company records image
 
What is NINO?

A National Insurance Number, also more commonly known as a NINO or a NI, is a unique personal reference number consisting of two letters followed by six numbers and ending in a letter associated with an individual's records of national insurance contributions, tax payments, benefits, and student loans. Even though it is a unique personal number, it is not proof of your identity or the right to work in the UK; neither does it allow entitlement to benefit or confirm your immigration status.

 
NINO for directors
 

Directors of any company are classed as employees; therefore, they also need to pay NINO. However, National Insurance is calculated differently than a regular employee tax contribution. As a result, directors pay NINO on annual income from salary and bonuses over £9,568 rather than each pay period.

Companies must pay the employer's NI on the director's salary, even if you are the only employee within the company.

 
How to calculate NINO for a director of the company?

If you are the one who runs the payroll in the company, there are two ways of work out NI on the director's salary.

Annual Calculation method.

This method is used when the director salary is irregular from month to month. The National Insurance will be paid when it is due, meaning the director's salary first needs to go over £9,568 annually and only then NI will be calculated on the standard rate charge. So the amount of NI contribution will be increasing gradually as the annual salary increases.

Alternative Calculation method.

This method is used when the director is paid the same amount each month, the same way as a typical employee. In this case, the NI is paid evenly throughout the whole year. This method can cause some difficulty at the end of the tax year or when the director's employment ends. At the end of each year, a final annual calculation is made, and if, for example, the director received a bonus one month or skipped the salary another month, that may result in a higher NI bill or a refund. Any differences between paid and due amounts must be or paid or refunded.

The director, if he decides, can move from the alternative method to the annual process at any time of the year. However, he cannot switch back to the alternative method if his NI calculations started with the yearly method.

 
Alternative Calculation method.

This method is used when the director is paid the same amount each month, the same way as a typical employee. In this case, the NI is paid evenly throughout the whole year. This method can cause some difficulty at the end of the tax year or when the director's employment ends. At the end of each year, a final annual calculation is made, and if, for example, the director received a bonus one month or skipped the salary another month, that may result in a higher NI bill or a refund. Any differences between paid and due amounts must be or paid or refunded.
The director, if he decides, can move from the alternative method to the annual process at any time of the year. However, he cannot switch back to the alternative method if his NI calculations started with the yearly method.

How to calculate NINO when the directorship ends?
 

If the director leaves the company and is no longer on the payroll and has been using the Alternative method of calculation, he is treated as an ordinary employee. Therefore, the final annual NI calculation for this director is calculated with his last pay.

On the other hand, if the director is no longer holds that position but still stays as an employee within the company, he must remain as a director for National Insurance purposes until the final annual calculation is completed.

Lastly, make sure when calculating directors' National Insurance to use the correct method. This will help you to avoid unexpected visits from an HMRC compliance team.

 

The National insurance manual can be found here:


https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim39330

To apply for a NINO (Free of Charge)

https://www.gov.uk/apply-national-insurance-number

If you have a NINO number but have lost or misplaced it


https://www.gov.uk/lost-national-insurance-number

If you would like more information, please contact our customer engagement team who would be delighted to assist you further.

Email us: [email protected]

Call us: 0207 781 8033