Employees and Directors

If an individual is working for someone else the chances are that they are being paid via the PAYE scheme (Pay As You Earn) – the exception being if they are contracting and are outside of the grasp of IR35 rules, which would make them a self employed contractor. We will cover more about the self employed in our self employed section.

The main difference between the tax treatment of employees and directors is the way in which national insurance contributions are calculated. Employees have national insurance calculated on a ‘per pay period’ basis – so they only pay contributions based upon what they earn in each period. Directors, however, will have their contributions based upon the annual earnings as their remuneration may vary each pay period. Company Directors may choose to pay themselves using a combination of remuneration methods – so some pay take a small salary under the PAYE scheme, or as Self Employment income and then take the remainder as a dividend.

Even though it may seem that as employees are not in charge of a company they would not require the services of an accountant, there are many services an accountant can offer employees, such as:

1. Self Assessment Tax Return
2. Allowances and Reliefs
3. Capital Gains Tax
4. Property Tax
5. Retirement Planning
6. Tax Investigations
7. Inheritance Tax
8. Foreign Earnings and Overseas Tax Planning
9. Bankruptcy
10. IVAs