As a director, you can often feel like there are so many different rules and regulations to keep track of that there is little time left in the day to run your business.
Unsurprisingly, this leads to mistakes being made when directors try to manage their own finances.
When regulations change, people get caught out and HMRC are now warning that many directors could be at risk of penalties if they do not check their finances.
We want to help you understand the problem and what you should be doing to make sure everything is accurate and compliant.
Why are HMRC worried about director NICs?
HMRC have raised the alarm that a growing number of directors may be paying the incorrect amount of National Insurance Contributions (NICs).
In particular, those on PAYE are particularly at risk as they may have calculated NICs using outdated information.
The crux of the problem is that NIC rates changed twice in 2024, which could have led to some directors getting confused as to which rates applied and when.
Generally, HMRC observes a notable increase in errors whenever rates change, with many failing to keep pace with new requirements.
The problem is understandably worse in years where rates change more than once, so it is unsurprising that concerns are being raised now.
What should directors do to stay compliant?
If you are a director on PAYE, then it is time to review your NICs to make sure they are accurate.
Double-check your calculations to find out whether you have been paying the correct amount.
If you do discover any issues, then you should alert HMRC as soon as possible.
In some cases, you can self-correct, but this may not always be possible.
When this is not an option, we would strongly advise the use of the voluntary disclosure service.
This is a way of admitting error to HMRC and will be better for you in the long run.
While voluntary disclosure does not protect you from penalties, it does incentivise HMRC to treat you more favourably, given the honesty with which you have confronted the situation.
Employers are legally obliged to declare and pay the correct amounts of PAYE.
This means that if a taxpayer discovers they have made an error, they must declare it and must do so without hesitation.
Moving forward, we would recommend seeking professional support to ensure that all of your filings and payments are accurate.
This is especially true with the Autumn Budget likely to change rates and thresholds for a host of different taxes and obligations, so having an expert walk you through everything will help you keep up.
We are on hand to help and support directors not only with keeping compliant but with some helpful advice on managing their tax bills and growing their business.
