It is your choice what level of directors’ fee you wish to set for the 2023/24 tax year. If you set your director’s fee at the personal allowance threshold of £12,570, this equates to £241.73 per week or £1,047.50 per month. Or you can consider setting your directors fee at £9,100 ( the Employer’s National Insurance threshold).
This amount utilises all of the personal allowance of £12,570 so there is no income tax payable –also you do not incur Employee’s National Insurance ( as the Employee’s primary threshold is also set at £12,570.) However, there will be an element of Employer’s National Insurance to pay later in the year of £478, but overall, it is generally more tax efficient to set the director’s fee this level. The corporation tax saving in this respect ( if your profits are less than £50,000- but will be higher if profits are in excess of this) is £2388.
If you choose to set a salary of £9,100, this will not attract any Income Tax or NI liability- but the corporation Tax relief will be less.
In order to qualify for the full state pension and other social security benefits, though, you need to have earned more than the ‘lower earnings limit’ for a period. This limit varies benefit by benefit and, in the case of the state pension, can be a very long-term calculation. The lower earnings limit is £123 per week for the 2023/24 tax-year (which commences on 6 April 2023).
The main reasons to process a director’s fee is to utilise your personal tax allowance efficiently ( if you have no other employment income or pension income), benefit from corporation tax relief on this payment and ensure that you making adequate credits towards your state pension.