Director information hub: Income Tax and National Insurance
Income Tax and National Insurance contributions must be deducted from any wages paid to company employees.
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About PAYE
As an employer, a company normally operates PAYE (Pay As You Earn). PAYE is HMRC’s system to collect Income Tax and National Insurance deducted from the employees’ wages.
Responsibilities
As a director you are responsible for:
- operating the PAYE system
- ensuring other relevant deductions from income are made including, but not limited to, collection of Student Loan deductions and payment of Statutory Sick Pay
- reporting your employees Income Tax and National Insurance deductions to HMRC in real time on or before payments are made through the PAYE process
Income Tax
As a director, the amount of Income Tax you personally pay depends on:
- the salary and benefits you take each year from your company
- what tax allowances you have
- the rates at which tax is payable
The current rates and allowances, as well as those for the previous 3 years, are available on GOV.UK.
You may also have to pay Income Tax on dividends you receive from owning shares in a company.
National Insurance
National Insurance contributions for directors are calculated annually. This differs from National Insurance deductions for employees which are calculated monthly. More information on National Insurance deductions for directors can be found on GOV.UK.
If you are the only employee of the company, you will only pay National Insurance contributions on the earnings you pay yourself.