Set employee as director
If your employee is a company director, set their employment status as director, select their directorship start date, and select their National Insurance calculation method. This way, we'll calculate their taxes as a director instead of a regular employee.
If you add an employee as a Director, Xero will add the Directorship section in the next effective pay period and calendar after their directorship start date.
If you pay the employee for their directorship but they later give this up, you can enter an end date and Xero will add a note in the employee details showing the pay period and calendar when the directorship stopped.
You can only reinstate the employee as a Director after the effective pay period has passed.
To set an employee as director:
- In the Payroll menu, select Employees.
- Click the employee who is the company director.
- Click the Taxes tab.
Under Tax Information, set your employee's directorship employment status.
- Under Is [employee name] a Director?, click Yes to set the employee as a director.
- Under Directorship Start date, select the date they became the company director.
Under NICs Calculation Method, select how their National Insurance calculates:
- Annual - (also known as the Non-Cumulative or NIC method): The director doesn't pay any National Insurance until they meet the annual threshold (The 2017/18 threshold is 8164. The 2016/17 threshold is 8060). Each time you pay a director, Xero looks at their total pay for the tax year so far, and once the threshold is exceeded, Xero will start to deduct NIC. This means that it is unlikely you will see NIC deductions until the later months of the year.
- Alternative - (also known as the Cumulative method): Xero looks at the threshold (The 2017/18 threshold is 8164. The 2016/17 threshold is 8060) in conjunction with the current tax week and the start date of directorship before it calculates your directorship deductions.
- Click Save.