Understanding director's National Insurance (NI) at payroll year end

Information on director's NI at year end in Sage 50 Payroll.

You don't need to do anything different for directors at year end.

When you process the final period of the tax year for a pro-rata basis director, the following message appears:

'This director has been recalculated on a YTD (year to date) basis.'

This message is normal. Click OK and continue to process their payments as usual.

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Calculation methods

There are two NI calculation methods for directors, Pro-rata and Annual. Find out below how each method works at year end.

Pro-rata basis

These directors' NI contributions calculate the same way as a standard employee. Your software splits their NI allowance for the year between each pay period. This means they're more likely to pay some NI in each month of the tax year.

In the last pay run of the tax year you must recalculate their NI for the year on a cumulative basis. Sometimes, this results in the director paying more or less NI than normal in this final period, even if their payments don't change.

Sage 50 Payroll automatically calculates these directors' final period of the tax year using cumulatively.

Annual basis

These directors can earn up to the annual primary threshold (PT) before they begin to pay NI.

They may start the year without paying any NI, and only start paying NI when their earnings to date exceed the annual PT.

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Calculation examples

For more information on how your software calculates Pro-rata basis and Annual basis NI, visit our examples of directors NI calculations article.

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