Director, how do I pay myself?
DavidJonas
Posts: 119 Forumite
I have set up a little business - a private limited company of which I am the sole director which - currently and probably for at least the next year or so - is destined to pay me £500 a month. That is all I intend to take out. It will be my only employment income.
I assumed this would involve PAYE but when I looked at registering as an employer that is only suitable if you will be paying £118+ per week, which is not the case here. Close, but less than £118 per week (which is £6136 pa)
Nor does £6000 seem to trigger any sort of national insurance - for employee or employer.
So, how do I pay myself? Is it really as simple as just invoicing the company and making a bank transfer? Then everything shakes out in self assessment, company accounts/corp tax etc.
Sounds too easy somehow.
I assumed this would involve PAYE but when I looked at registering as an employer that is only suitable if you will be paying £118+ per week, which is not the case here. Close, but less than £118 per week (which is £6136 pa)
Nor does £6000 seem to trigger any sort of national insurance - for employee or employer.
So, how do I pay myself? Is it really as simple as just invoicing the company and making a bank transfer? Then everything shakes out in self assessment, company accounts/corp tax etc.
Sounds too easy somehow.
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Comments
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Do you have any other income?0
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Yes, but not from employment. Not a pension yet, either.
Which seems to chop off all the routes through the HMRC "register as an employer" pathway. Not proposing to take any expenses/benefits.0 -
You can still register as an employer and pay via PAYE. Not ticking their boxes doesn't mean you can't do it - it means you don't have to.0
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You can still register as an employer and pay via PAYE. Not ticking their boxes doesn't mean you can't do it - it means you don't have to.
Okay.
But if I don't, the alternative is presumably just to write myself cheques and keep a record?
I won't do anything solely on the basis of this advice, but it is helpful to get a feel for the alternatives.0 -
"you1" (the employer) are not required to operate PAYE because "you2" (the employee) will earn below the threshold.DavidJonas wrote: »But if I don't, the alternative is presumably just to write myself cheques and keep a record?
so yes, in principle You1 pays You2 and records that fact in its accounts as a pay cost. You2 records the income and declares that on their tax return because i find it unlikely you have total income from all sources of less than the personal allowance?
as for thresholds: see https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2019-to-2020
if you2 earns less than £118 per week then think carefully because you will not get a credit towards state pension.
Alternatively, if you2 earns between £118 - £166 (ie £719 per month) you1 will not have to pay any employers NI and you2 will not pay employee NI, but crucially you2 will get a pension credit despite not physically paying tax.
that sort of tax planning is why you use an accountant, particularly if the company is profitable and you want to take out dividends instead of, / as well as, pay...
PS be very careful to behave as though it were pay, ie regular, same amount etc. Otherwise, if you go ad hoc, it could look like a loan and/or undeclared dividend. Both have repercussions if incorrectly recorded.0 -
Thank you, that is very helpful!0
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DavidJonas wrote: »Yes, but not from employment. Not a pension yet, either.
Which seems to chop off all the routes through the HMRC "register as an employer" pathway. Not proposing to take any expenses/benefits.
You pay tax & NI on your total income.
So you add your income from your other jobs to this & you pay tax on it as a whole.0
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