Director of LTD Company, self employed or employed?

MrsMJ

Hi, My brother-in-law has started a limited company (England) and he is the sole director and employee of the company, which is not yet bringing in any money - but he is confused about wether he registers as self employed or wether he has to be employed by the company?

Can anyone help in simple terms?

agrinnall

To be honest I'm not sure whether a director has to be an employee, but it would be the easiest option unless he has a good reason to want to be self employed. I was sole director and sole employee of my limited company for the 11 years of its existence.

lauzt1987

If he plans to extract money out of the company via salary and dividends (which is generally the most tax efficient way) then he will have to be employed by the company. He therefore won't have to register as self employed, but will have to register for self assessment as all directors are required to complete a tax return. He is best seeking a good accountant though, as he'll need a set of accounts done, corporation tax return, payroll etc.

paddyrg

He's not self-employed, he's employed by the company. He may also receive a dividend from his investments. He will still need to complete a self-assessment year-end return as a company director, but for clarity he isn't self-employed.

p00hsticks

lauzt1987 wrote: »

If he plans to extract money out of the company via salary and dividends (which is generally the most tax efficient way) then he will have to be employed by the company.

You have to be employed to take a salary, but not to take dividends - any shareholder will receive those.

Wayne_O_Mac

If he's a director, then he's considered employed for tax purposes, as a directorship is an office and tax law treats them the same

Dazed_and_confused

I think the fact that your bil has asked this is a strong indicator that he needs the services of an accountant before he gets himself in a right old pickle

MrsMJ

Thanks for the replies folks. I am not sure wether he has an accountant or not yet, he has just started it up - but I think from the replies it is obviously a good idea.

Can anyone tell us what it is like setting up PAYE for a business to get paid? Is this a requirement? Or is it when it's over a certain amount?

Dazed_and_confused

Yes it is required for your bil, more info on gov.uk

https://www.gov.uk/register-employer

Majestic12

Wayne_O_Mac wrote: »

If he's a director, then he's considered employed for tax purposes, as a directorship is an office and tax law treats them the same

Would that entail if they are employed, they have to pay themselves minimum wage? This is the area which is a little confusing, as a good number of directors in small companies pay little to no salaries to themselves, but dividends.

Wayne_O_Mac

Directors are exempt from minimum wage regulations.