Not so much cutting tax as paying tax!

Iateallthepies

After around 2 years of unemployment I took a position in November that required me to set up a Limitied Company which I did and registered with tax office as employee of Ltd Co. I get paid a monthly figure equivalent to minimum wage and will soon, hopefully, be earning commission on top of this but have not done so yet. As ?I am supporting a family of three children and a non working wife money is still incredibly tight and so I have not yet set up an accountant and dont have the first clue about how to pay on a PAYE basis and how much I should pay.
Please forgive my ignorance, I have never been in this situation before, and would appreciate any helpful advice?

chrismac1

You should put through a salary of 589 per month on which there should be no tax or NI. But when you file the end of year tax return you'll get a year's credit towards state benefits. You should set yourself up as an employer in order to do this, in the payroll software ensure you use the "Director" option. Link for setting yourself up as an employer:

http://www.hmrc.gov.uk/paye/intro/register.htm

For quarters 1 to 3 you need to tell HMRC - one you have your employer ref. and Accounts Office ref. - that no tax was due, use this link:

http://www.hmrc.gov.uk/tools/payinghmrc/no-quarter-payment.htm

You can say that I would say this, but you need to find an accountant unless you plan to learn the Companies Act, and how to file compliant accounts and corporation tax returns within 9 months of your year-end. The fines are £250 in all - and the way things are going, will probably be higher by then - for not filing on time in a fully compliant manner.

chrismac1

Note that 602 is the most tax-efficient monthly salary, but 589 is simpler for you to use so you don't have any NI to pay in May.

agrinnall

Can I ask what sort of position this is? It sounds odd that you would be required to set up a limited company yet only receive the equivalent of NMW. To be honest it sounds like whoever is paying your company is doing so to try to get out of making you an employee and having to pay employers NI, holiday etc. If HMRC look at what you do and decide that it is actually employment then they may not allow you to continue to operate in the way that you are.

Iateallthepies

Reply to agrinall:

I am working in a sales position where the opportunity to earn commission will be high so the low basic is to be expected. I am contracted to work for 40 hours a week for 46 weeks a year and free to work elsewhere for the remaining time.

Thanks for the responses so far I will certainly take your advice. So I know for the future why the exact figure quoted of £589? Does this make the most of my personal allowance without paying tax? The balance would be paid as dividends and then subject to Corporation Tax at 20%?

atilla

You need to speak to an Accountant, really, you do.
If Mr nasty from HMRC comes a calling, bsed on your employment description you appear to be heading for the naughty step.

Regarding monthly income/deductions, Dividends and Corporation tax, your apparent lack of knowledge suggests you may get yourself into bother there too.

Find an Accountant, they'll give you guidance and advice and in all likelyhood won't be hitting you with charges up front.

The new compliance checks the HMRC are about to start on small firms could be very painful if they choose you.

Iateallthepies

OK you got me worried now! I guess that if I cannot afford an accountant then I am not in a viable business.

atilla

Iateallthepies wrote: »

OK you got me worried now! I guess that if I cannot afford an accountant then I am not in a viable business.

Not saying that.
A decent accountant will not hit you with large up front charges. Work it out between you how their charges are paid - monthly/quarterly/annually.

But, unless you are very competent with doing accounts, submitting returns AND knowledgeable about the legals etc, you WILL need one. At the risk of appearing rude, your posts suggest you are not.

Arrange an appointment with 3-4 local ones. Nearly all will give you a free initial meeting. See what they have to say. Most importantly though, when you do choose one, make sure it is one you feel comfortable and at ease with.