Ltd company/payroll

[diditrain]

Hi all, I recently set up a Ltd company and have not paid myself for 3 months, whilst I was waiting for monies to come in etc.
My accountant is in the process of setting up payroll for me, but I have not had much chance to have a chat with him on how this works.
Can anyone give me a crash course on how this works? Can I just take some money out of my business account and keep a personal record on what this payment was for, i.e wages.
Also would there be an issue if I took payment for the three months that I have not paid myself for and record this as back dated wages. It’s not a huge amount as the business is going to pay me a set amount every week.
Many thanks

 

[Midwest]

Its your money (well some of it belongs to the taxman), and you can do with what you want, allowing for overheads etc. Your business is not going to work, if you can't pay yourself.

 

[Octopus]

You should really be asking your accuntant this

But if you thank this will lower your tax bills, its unlikely to have much of effect, due to recent charges in the way wax is paid on dividerds etc .......... and higher accuntants charges

 

[plugsandsparks]

You have choices on how to take money out of your business. It usually is a mix of Wages and dividend. This will depend on your Ltd company set up wrt to shareholders and your own personal tax situation. e.g. you may want to keep up your National insurance contributions for your state pension and other NI related benefits, if so you need to pay yourself at least the lower earnings limit. Your wages will be recorded electronically with HMRC so you wont need personal records as payslips and the like will come from whatever software you are using.
I do all this myself but as you have an accountant you might as well discuss with him the best strategy for wages, PAYE, frequency of wages and the like. One thing to bear in mind is that NI is calculated weekly, its a bit bizarre, so dont pay yourself 3 months in one go without setting up PAYE correctly for a director otherwise you will pay alot of NI and never get it back.

 

[diditrain]

Yes, I just did not want to start taking money out and then find that I have made a boo boo

 

[SJD]

To add to plugsandsparks post,

You need to have registered with HMRC for PAYE if you want to pay yourself any wages. And file a monthly return before you pay anything. You can do all this yourself, if you wish, you don't need an accountant to make this return.

As mentioned, paying 3 months in one go is likely to incur an NI charge that might not have been needed if you paid it over 3 months or 13 weeks. If you do have NI or tax to pay, you need to send this to HMRC in a timely manner (or risk a fine).

Alternatively you can declare a dividend, which has to be paid according to the shareholders a the time. Again, you need to be aware of implications to personal tax to anyone receiving a dividend above the allowance.

I suggest you check carefully before making any payments.

 

[diditrain]

Thank`s for all of the advice, greatly appreciated.

 

[Deleted member 26818]

There are many ways of paying yourself from a Ltd. Co.

One method is to pay yourself so little, that you do not have to pay either tax or NI. The rest is then paid in dividends.
Dividends being taxed differently from earnings.

Another way is to pay your self a decent wage and then pay tax and NI, your Ltd. Co. would then have to pay Employer’s NI contribution.

Another method is to pay yourself as a subcontractor, your Ltd. Co. would deduct 20% CIS tax, and you’d then have to Self Assess.

Another method still, is to pay yourself minimum wage, pay tax and NI, your Ltd. Co. pays Employer’s NI contribution, and the rest is paid as a dividend.

 

[Deleted member 26818]

Expenses can be handled in various ways, depending upon how you decide to pay yourself.

 

[Nigel]

Completely pointless paying yourself as a sub-contractor. That is just another set of accounts to file and you already have to self-asses as a Company Director anyway.

What you need to do is register all the money you take from the business as a ‘Directors loan’. At the end of your FY the accountant will look at how to declare what so that you are the most tax-efficient. It is up to you as MD to ensure you do not take out more than you should. To do so at the behest of HMRC or other creditors could mean you are trading whilst technically insolvent and that is a criminal offence.

You do not have to register for payroll if you earn less than £118 per week which is unlikely.

Payroll software is also free for companies with less than 10 employees.

 

[diditrain]

Thank`s again for all of the input. I could not afford to only take £118 per week. I would probably have to eat beans every day. Blinking dog eats better than me these days.

 

[diditrain]

If you do take a directors loan, how and when do you pay it back when the business is your only source of income? Is this something the accountant will sort out for you?

 

[Nigel]

If you do take a directors loan, how and when do you pay it back when the business is your only source of income? Is this something the accountant will sort out for you?

Yes accountant will sort.

I pay myself basic wage of about £800 per month which goes through monthly payroll and anything else I take out is classed as a Directors Loan from the business to me.

At the end of the FY I then need to pay back the loan but the conpany will them owe me dividends if the company is in profit so I get it back.

It is all a paperwork exercise basically.