PAYE Director Payroll Alignment

If you're a director of a limited company, you need to be on PAYE—which means your company must operate PAYE on any salary you take, deducting Income Tax and National Insurance, and filing payroll returns with HMRC. Directors of limited companies must be on PAYE if they receive a salary, with the company operating PAYE and deducting Income Tax and National Insurance from director salaries (gov.uk PAYE). The optimal director salary is typically set at the National Insurance primary threshold (£12,570) to gain NI credits without paying employee NI, then remaining income taken as dividends which are taxed more favourably. Directors pay National Insurance differently from employees—directors' NI is calculated on an annual basis rather than per pay period, meaning annual salary can be allocated across the year for NI calculation purposes.

The problem is most directors don't understand director PAYE properly. They don't know the optimal salary level, struggle with directors' NI calculations, or don't align salary and dividends efficiently. That causes problems—overpaid tax and NI, missed tax efficiency opportunities, and confusion about PAYE obligations.

We handle PAYE director payroll alignment for limited company directors who want to optimize their tax position: director PAYE setup (setting up PAYE for directors, registering with HMRC, operating PAYE correctly), optimal salary calculation (calculating optimal director salary based on current tax rates and thresholds), directors' NI calculations (calculating directors' NI on annual basis correctly), salary and dividend alignment (aligning salary and dividend payments to maximize tax efficiency), payroll processing (processing director payroll through PAYE with correct deductions), and annual payroll alignment (reviewing and adjusting director remuneration annually to maintain tax efficiency). Whether you're a director in Medway taking a small salary, a director in Maidstone optimizing salary and dividends, or a director in Canterbury needing PAYE alignment, we'll handle your director payroll that works. No overpaid tax, no missed opportunities—just optimal director remuneration that maximizes tax efficiency.

What this helps you do (fast)

• Set up director PAYE correctly — Register and operate PAYE for directors with correct deductions and reporting. Proper PAYE setup means compliance and correct tax treatment.
• Calculate optimal director salary — Calculate the best salary level to gain NI credits while minimizing tax and NI costs. Optimal salary saves you money.
• Process director payroll accurately — Process director payroll through PAYE with correct Income Tax and NI deductions. Accurate payroll ensures correct tax treatment.
• Align salary and dividends efficiently — Combine optimal salary with dividends to maximize tax efficiency. Salary-dividend alignment saves significant tax and NI.
• Understand directors' NI — Understand how directors' NI differs from employees and calculate it correctly. Correct NI calculation ensures compliance.
• Review remuneration annually — Review and adjust director remuneration annually to maintain tax efficiency as thresholds change. Annual reviews keep you optimized.

How it works

Step-by-step process for PAYE director payroll alignment:

1. Discovery call — We chat about your director situation: what type of company you run, what salary you're currently taking (if any), whether you're on PAYE, what dividends you take, what your total income needs are, and what you want to achieve.
2. Current remuneration review — We review your current setup:
   • Current salary assessment — Assess current director salary (if any) and how it's paid
   • PAYE status check — Check whether PAYE is set up and operating correctly
   • Dividend review — Review dividend payments and how they align with salary
   • Tax efficiency analysis — Analyze current tax efficiency of salary and dividend mix
   • NI status check — Check NI contributions and whether you're gaining NI credits
   Current remuneration review identifies opportunities to improve tax efficiency.
3. Optimal salary calculation — We calculate your optimal salary:
   • Threshold analysis — Analyze key thresholds (personal allowance, NI thresholds, employer NI threshold)
   • Salary options — Calculate different salary options (£5,000, £9,100, £12,570, etc.) and their tax/NI impact
   • NI credits consideration — Consider NI credits for state pension (salary at or above lower earnings limit)
   • Employer NI impact — Calculate employer NI costs at different salary levels
   • Optimal salary recommendation — Recommend optimal salary based on your circumstances
   Optimal salary calculation ensures you're taking the most tax-efficient salary.
4. Directors' NI calculation — We calculate directors' NI correctly:
   • Annual calculation method — Apply annual calculation method for directors' NI (not per pay period)
   • Salary allocation — Allocate annual salary across tax year for NI calculation purposes
   • NI thresholds — Apply correct NI thresholds for directors (£12,570 primary threshold)
   • NI rate application — Apply correct NI rates (8% employee NI between thresholds, 2% above)
   • Employer NI calculation — Calculate employer NI (15% above employment allowance threshold)
   Directors' NI calculation ensures correct NI treatment and compliance.
5. Salary and dividend alignment — We align salary and dividends:
   • Remaining income calculation — Calculate remaining income needs after optimal salary
   • Dividend planning — Plan dividend payments to complement salary tax-efficiently
   • Total income optimization — Optimize total income (salary + dividends) to stay within tax-efficient thresholds
   • Tax efficiency maximization — Maximize tax efficiency by balancing salary and dividends
   • Profit availability check — Ensure company has sufficient profits to pay planned dividends
   Salary and dividend alignment maximizes tax efficiency while meeting income needs.
6. PAYE setup and processing — We set up and process PAYE:
   • PAYE registration — Register company for PAYE with HMRC if not already registered
   • Director PAYE setup — Set up PAYE for directors with correct tax codes and NI categories
   • Payroll processing — Process director payroll monthly or as needed with correct deductions
   • RTI reporting — Submit RTI returns to HMRC reporting director payroll
   • Payslip generation — Generate payslips for directors showing deductions
   PAYE setup and processing ensures compliance and correct tax treatment.
7. Annual payroll alignment review — We review payroll alignment annually:
   • Tax year-end review — Review director remuneration before tax year-end
   • Threshold changes — Check for changes in tax thresholds or rates
   • Remuneration adjustment — Adjust director salary and dividend strategy if needed
   • Efficiency check — Check tax efficiency of current remuneration strategy
   • Forward planning — Plan remuneration for coming tax year
   Annual payroll alignment review maintains tax efficiency over time.

We handle all aspects of PAYE director payroll alignment. The key is calculating optimal salary, processing PAYE correctly, aligning salary with dividends efficiently, and reviewing annually, so you maximize tax efficiency and minimize total tax and NI costs.

Costs & timelines

Pricing factors:

• PAYE setup complexity — Simple PAYE setup costs less than complex setups (multiple directors, complex arrangements)
• Payroll processing frequency — Monthly payroll costs more than annual or ad-hoc processing
• Remuneration optimization complexity — Simple optimization costs less than complex optimization (multiple income sources, complex tax planning)
• Ongoing support — If you need ongoing payroll processing and alignment support, this affects pricing
• Annual review — If you need annual remuneration review and adjustment, this adds to the cost

Commonly reported ranges by local providers:

• Basic director PAYE setup: £100–£200 for setting up PAYE for directors and registering with HMRC
• Optimal salary calculation and alignment: £200–£400 for calculating optimal salary and aligning with dividends
• Director payroll processing (monthly): £15–£30 per month for monthly director payroll processing
• Director payroll processing (annual): £100–£200 per year for annual director payroll processing
• Annual remuneration review: £150–£300 per year for annual review and adjustment of director remuneration
• Comprehensive PAYE alignment (setup + ongoing): £400–£800 per year for comprehensive PAYE setup, optimal salary calculation, ongoing payroll processing, and annual reviews

Why PAYE director payroll alignment costs what it does:

• PAYE setup requires registering with HMRC and configuring payroll systems correctly
• Optimal salary calculation requires understanding tax thresholds, NI rates, and tax efficiency
• Directors' NI calculation requires understanding annual calculation method and applying correctly
• Salary and dividend alignment requires planning total income strategy and maximizing tax efficiency
• Payroll processing requires operating PAYE correctly with RTI reporting
• Annual review requires staying current with tax changes and adjusting strategies

Timeline: PAYE setup typically takes 1-2 weeks from when we receive company details. Optimal salary calculation and alignment can be done in 1-2 weeks. Payroll processing happens monthly (or as needed) for ongoing processing. Annual reviews typically happen before tax year-end (before 5 April) or early in new tax year.

Payment: PAYE setup fees are usually charged upfront. Payroll processing fees are charged monthly or annually. Remuneration optimization and annual reviews are charged when completed. We'll discuss payment options when we understand your needs.

No hidden fees. PAYE director payroll alignment price includes setup, optimal salary calculation, initial alignment, and payroll processing. Annual reviews and ongoing optimization are included in ongoing service packages or separate if needed.

Kent (UK) focus

We work with directors across Kent who need PAYE payroll alignment: directors in Medway running small limited companies, directors in Maidstone optimizing salary and dividends, and directors in Canterbury needing comprehensive PAYE support.

Kent directors face the same PAYE obligations as everyone else—registering for PAYE, operating PAYE correctly, and optimizing director remuneration. The difference is when you get proper help with PAYE director payroll alignment, you take optimal salary, process PAYE correctly, and align salary with dividends efficiently. That's what helps Kent directors maximize tax efficiency and minimize total tax and NI costs.

Common Kent director scenarios:

• Small company directors — Directors of small limited companies taking minimal salary
• Growing company directors — Directors of growing companies optimizing remuneration as income increases
• Multiple directors — Companies with multiple directors needing PAYE for all
• Salary and dividend mix — Directors combining salary and dividends for tax efficiency
• Annual optimization — Directors needing annual review and adjustment of remuneration

Kent business market context:

• Many Kent businesses are small to medium-sized limited companies with director-shareholders
• Proper PAYE alignment helps Kent directors maximize tax efficiency and save money
• Optimal salary and dividend strategy helps Kent directors keep more of what they earn
• Local PAYE expertise helps Kent directors navigate complex director PAYE requirements

Remote-first, Kent-focused. We don't need to meet in person (though we can if you prefer), and we understand what Kent directors are dealing with. PAYE setup, optimal salary, directors' NI, salary-dividend alignment—we'll handle your director payroll that maximizes tax efficiency and keeps you compliant.

FAQs