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In this article we will go through how national insurance works in the UK and even how you can receive income totally tax free! as a digital nomad with a UK Limited Company! 

Directors of limited companies are considered employees and therefore must pay national insurance in the UK (In the Class 1 National insurance thresholds bracket). If your salary as a director does not exceed the Secondary Threshold (£732/month), then you don’t have to pay any national insurance contributions.

Furthermore, as this amount is within the personal allowance the threshold below which an LTD company director does not need to pay Personal Income Tax), you won’t pay any tax whatsoever below the Secondary Threshold! After you start earning a wage above the Secondary Threshold. The rate is set at 13.8%.

Also worth mentioning is the Lower Earnings Limit (LEL), which enables UK employees to receive insurance as well as the state pension, without paying any NI contributions. This limit is currently set at £520 per month. The minimum state pension requires 10 qualifying years to be paid out after reaching the pension age. Qualifying years are the years you have been working receiving an income above LEL.

Below you will find tables with the rates of national insurance depending on the category and threshold.

 

National Insurance Thresholds

LEL= Lower earnings limit  applicable below  £520/month
ST = Secondary threshold applicable between £520- £732/month
PT = Primary Threshold applicable along with ST between £792- £4,167/month
UEL = Upper Earnings Limit > £4,167/month

 

National Insurance Categories

A – All employees apart from those in the remaining categories
B – Married and widowed women can pay a reduced national insurance
C – Employees that are over the state pension age
H – An apprentice under 25
J – An employee who can defer national insurance due to paying it in another job
M – Employees under 21
Z – The same as category J but for employees under 21

 

Employee National Insurance Rates (how much employers deduct from employees’ pay)

Category LEL-PT

Rate %

ST-UEL

Rate %

Above UEL

Rate %

A 0 12 2
B 0 5.85 2
C n/a n/a n/a
H 0 12 2
J 0 2 2
M 0 12 2
Z 0 2 2

 

Employer National Insurance rates (how much employers pay towards employee NI)

Category LEL-PT

Rate %

ST-UEL

Rate %

Above UEL

Rate %

A 0 13.8 13.8
B 0 13.8 13.8
C 0 13.8 13.8
H 0 0 13.8
J 0 13.8 13.8
M 0 0 13.8
Z 0 0 13.8

 

To summarize, as a director you can pay yourself a salary of up to £732/month (£8,788/annum) without having to pay any national insurance or income tax in the UK. You can still pay yourself more than this without paying income tax (up to £12,500/annum)

If you have any questions related to national insurance in the UK or you’re looking to register a LTD there, then please don’t hesitate to contact us or arrange a free consultation with one of our experts. We will be happy to assist you and answer any questions!

Interested? Leave us a message, we'll get back to you as soon as possible.

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Glossary

Word/Term Definition/Description
Exempt Free from or not subject to e.g. these products are VAT exempt.
Fishery An entity that raises or harvests fish, in this case to sell commercially.
HMRC Her Majesty’s Revenue and Customs – Government body responsible for the collection of taxes (including VAT) and NI.
Raw material Basic, starting material that a product is made from e.g. iron ore is a raw material of steel.
Threshold A benchmark or limit beyond or below which a different state of affairs exists. E.g. Going beyond the limit of the distance selling threshold, requires registration for VAT.
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