Need to move rental but self assessment salary is low (Company director) - Other ways?

Bookworm105

horsewithnoname said:

derobe said:

gazfocus said:

Can you confirm whether, through your ltd company, are you paying your wage through PAYE? If so, your ltd company should be issuing you with a payslip each month and you should be able to back that up with the salary payments going into your bank. 

The general requirement is that your annual salary is equal to, or more than 36 times the monthly rent, so a property of £1,000/month would require a salary of £36,000. 

As has been said above, private landlords sometimes don’t have the same requirements and are more lenient…we rented a house from a private landlord once and the landlord didn’t even ask us what our jobs or income were. He literally showed us the house, told us the deposit and said if we liked the house it was ours. 

For private landlords, take a look on openrent (not all openrent properties end up on Rightmove). 

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

From asking around and research online I'd seen annual salary needing to be 25x the monthly rent so if it is 36x that's going to be difficult but fingers crossed I can find someone

Yes I am checking openrent - not sure if there's any other portals out there... thinking gumtree or facebook marketplace too but it always seems there are many scammers operating on those platforms.

Do you really want to be owning up to fiddling tax on a public forum?
Do everyone a favour and tell your accountant to honest 😡

unlikely to be a fiddle given: accountant is able to show it as a low wage to avoid personal tax and NI is my understanding

It is perfectly normal for a director to have a low PAYE income with the balance paid as dividends. Dividends do not go thru PAYE and are taxed at a lower rate than income, they also do not incur NI at all. All perfectly legal and why you pay an accountant to manage it.

gazfocus

Bookworm105 said:

horsewithnoname said:

derobe said:

gazfocus said:

Can you confirm whether, through your ltd company, are you paying your wage through PAYE? If so, your ltd company should be issuing you with a payslip each month and you should be able to back that up with the salary payments going into your bank. 

The general requirement is that your annual salary is equal to, or more than 36 times the monthly rent, so a property of £1,000/month would require a salary of £36,000. 

As has been said above, private landlords sometimes don’t have the same requirements and are more lenient…we rented a house from a private landlord once and the landlord didn’t even ask us what our jobs or income were. He literally showed us the house, told us the deposit and said if we liked the house it was ours. 

For private landlords, take a look on openrent (not all openrent properties end up on Rightmove). 

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

From asking around and research online I'd seen annual salary needing to be 25x the monthly rent so if it is 36x that's going to be difficult but fingers crossed I can find someone

Yes I am checking openrent - not sure if there's any other portals out there... thinking gumtree or facebook marketplace too but it always seems there are many scammers operating on those platforms.

Do you really want to be owning up to fiddling tax on a public forum?
Do everyone a favour and tell your accountant to honest 😡

unlikely to be a fiddle given: accountant is able to show it as a low wage to avoid personal tax and NI is my understanding

It is perfectly normal for a director to have a low PAYE income with the balance paid as dividends. Dividends do not go thru PAYE and are taxed at a lower rate than income, they also do not incur NI at all. All perfectly legal and why you pay an accountant to manage it.

The OP has said they are not paid through PAYE at all, they also said they have been paid around £30k but only declared £9,900 salary and £1k dividend in tax return so what other conclusion can one come to other than it being a fiddle?

Grumpy_chap

gazfocus said:

The OP has said they are not paid through PAYE at all, they also said they have been paid around £30k but only declared £9,900 salary and £1k dividend in tax return so what other conclusion can one come to other than it being a fiddle?

I think you are putting a twist on what the OP has said that is unfair.
The OP has said:

derobe said:

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

I think, in essence, the OP does not know / understand how their drawings from the Ltd Co. are reported and declared.  Hopefully, this query over how to demonstrate income for a rental property will prompt the OP to take a bit more interest and become more knowledgeable on what they are signing off as the true accounts (for the Ltd Co) and true income (for their SA return).  The OP cannot simply bury their head in the sand and leave it all to the Accountant.

What the OP seems to be saying is that they draw £11k as salary and this is processed through the Ltd Co. payroll (PAYE) and declared as salary for which the correct employer's NI, employee's NI and income tax are paid.  The OP may not realise this is processed through PAYE, particularly if the salary drawn is not regular monthly and equal amounts.  The £11k salary is in the range that would make for tax efficient drawing while still accruing NI contribution years.
In addition to the £11k salary, the OP is drawing a further £19k (making the £30k total).  Some of this may be allowable business expenses so not subject to income tax liability.  The balance (probably the bulk) will be as dividends so subject to dividend tax, albeit there is a small amount for which the dividend tax is zero.

I don't think anything that has been said indicates a fiddle.
I do think the OP is not clued up on these matters and would benefit from being better clued up.  

gazfocus

Grumpy_chap said:

gazfocus said:

The OP has said they are not paid through PAYE at all, they also said they have been paid around £30k but only declared £9,900 salary and £1k dividend in tax return so what other conclusion can one come to other than it being a fiddle?

I think you are putting a twist on what the OP has said that is unfair.
The OP has said:

derobe said:

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

I think, in essence, the OP does not know / understand how their drawings from the Ltd Co. are reported and declared.  Hopefully, this query over how to demonstrate income for a rental property will prompt the OP to take a bit more interest and become more knowledgeable on what they are signing off as the true accounts (for the Ltd Co) and true income (for their SA return).  The OP cannot simply bury their head in the sand and leave it all to the Accountant.

What the OP seems to be saying is that they draw £11k as salary and this is processed through the Ltd Co. payroll (PAYE) and declared as salary for which the correct employer's NI, employee's NI and income tax are paid.  The OP may not realise this is processed through PAYE, particularly if the salary drawn is not regular monthly and equal amounts.  The £11k salary is in the range that would make for tax efficient drawing while still accruing NI contribution years.
In addition to the £11k salary, the OP is drawing a further £19k (making the £30k total).  Some of this may be allowable business expenses so not subject to income tax liability.  The balance (probably the bulk) will be as dividends so subject to dividend tax, albeit there is a small amount for which the dividend tax is zero.

I don't think anything that has been said indicates a fiddle.
I do think the OP is not clued up on these matters and would benefit from being better clued up.  

All we have to go on is what the OP has stated. I am not putting a twist on anything. 

In the first post of this thread, the op stated he declared £9,900 salary and £1k dividends, so I don’t understand how you come to the conclusion that the ‘probably bill’ was likely taken as dividends. 

I’m not trying to be an !!!!!! and just trying to understand how the OP has taken their income so I can try and offer helpful advice. 

I’m a company director myself and, perhaps foolishly, I pay all of my salary through PAYE so that when I need to prove my income, it’s much easier. 

sheramber

the OP is not the first person to find out that paying himself a small salary to save tax  resukls in problems elsewhere.

Dazed_and_C0nfused

sheramber said:

the OP is not the first person to find out that paying himself a small salary to save tax  resukls in problems elsewhere.

Spot on.

If they bother checking their State Pension forecast they could be in for a nasty shock.

Some recent threads on Accounting Web where one or two accountants seemed to think reporting under RTI wasn't needed for someone to get a qualifying NI year (when no other criteria for a qualifying year existed).

Grumpy_chap

gazfocus said:

All we have to go on is what the OP has stated. I am not putting a twist on anything. 

In the first post of this thread, the op stated he declared £9,900 salary and £1k dividends, so I don’t understand how you come to the conclusion that the ‘probably bill’ was likely taken as dividends. 

Yes, the OP did say:

derobe said:

my self assesment that's just been submitted shows I only took £9900 in salary + £1000 in Dividends due to there only being a break even/marginal profit for the company during the 23-24 tax year.

At present I pay myself around £2500/£30k with the company still being profitable each month

And later:

derobe said:

No it's not going through PAYE unfortunately I know that would make it easier - I definitely paid myself a lot more than the £10,990 declared it was probably closer to £30k for that year as well but the accountant is able to show it as a low wage to avoid personal tax and NI is my understanding. 

I take the two posts together and they refer to different tax periods.

In tax year 2023 - 24 (so the tax return just completed), the OP drew £10k salary plus £1k dividend.  The dividend will have used the dividend allowance so attracts no income tax liability.  The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Then we have the OP's following statement "at present I pay myself £30k" so this must mean the current tax year 2024 - 25.  The OP states £11k of the £30k is declared as salary.  That leaves three options for the remaining £19k:
 - allowable expenses (which some probably is, mileage or home office costs and such like)
 - dividend
 - loan from the Ltd Co to the OP

Given the OP has an Accountant, and the Accountant will be mindful of their PI cover plus their professional standing, I think we can be fairly sure that the proper tax is being (or will be when tax return is prepared) declared and paid in relation to the £19k.  It is also unlikely the Accountant has gone down the Director Loan route given the complexity that can arise and the OP's lack of accounting awareness.
It is also apparent that the OP does not have enough insight to this to actually know and understand how the current drawings are being recorded.
I really hope the OP will see the difficulty in demonstrating this income for a rental as a prompt to become more clued up.
The OP also needs to be aware that the £19k of drawings that are not declared as salary, so presumed dividend, will give rise to an income tax liability that has not been deducted at source via PAYE but will fall due by January 2026 at the latest.  The OP needs to put 20% of this (so £4k across the year) into a savings account so the money is there to pay the income tax bill when it falls due.

I think the OP has been unwise to simply leave this all to the Accountant with little understanding themselves, but I do not see that the OP and the Accountant are on the fiddle.

gazfocus

sheramber said:

the OP is not the first person to find out that paying himself a small salary to save tax  resukls in problems elsewhere.

Yes, I remember when we went into lockdown and Rishi announced the details of the furlough scheme, company directors were complaining that they could only get 80% of their declared ‘salary’ and not any of their dividends so ended up with a low amount of furlough.

Dazed_and_C0nfused

The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Only if the earnings were reported correctly under the RTI system.

And from what the op has posted so far I'm not convinced that that has happened.

Grumpy_chap

Dazed_and_C0nfused said:

The £10k salary is below the personal allowance so attracts no income tax but there will have been credit for the NI year (even if no NI was actually paid).

Only if the earnings were reported correctly under the RTI system.

And from what the op has posted so far I'm not convinced that that has happened.

You could be correct, but one would expect that the Accountant has done their job correctly even if the OP is not knowledgeable.  (I note your comments upthread about some Accountants being seemingly unaware of the reporting need, which is shocking.)
The OP also states they started their Ltd Co. in 2021, so I assume (which can be risky) the Accountant has been involved for four years now.