National Insurance for Directors is classed differently from that of employees. There are two methods which can be used for Directors National Insurance namely Cumulative (or Directors) and Table Method (or alternative).
Cumulative Directors National Insurance applies Annual Thresholds for calculating the amount due and as such no National Insurance is due until the earnings for the tax year exceed the Annual Earnings Threshold. National Insurance is then paid on all earnings until the Annual Upper Earnings Threshold is reached at which point all remaining earnings until the end of the tax year have a rate of 2% Employee National Insurance applied.
The effect of Cumulative Directors National Insurance which is most often noticed is that the Employees National Insurance deducted can fluctuate considerably with each payroll even if the payment is the same.
Table Method Directors National Insurance applies the appropriate thresholds for the payroll frequency, ie if paid monthly the monthly Thresholds are used. The amount of National Insurance deducted by Table Method Directors National Insurance is identical to that by standard Employee National Insurance, other than in the final payment of the tax year the total amount of National Insurance is recalculated for the complete tax year.
In total for a complete tax year the amount of Employees National Insurance deducted by either method of Cumulative or Table Method Directors is the same, the main difference is that with Cumulative Directors National Insurance the deduction fluctuate with each payroll whereas the Table Method are constant so long as the payment is the same.
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