Drawing a salary from a limited company

dearbecks
dearbecks Posts: 1 Newbie
in Small biz MoneySaving
Hello

My husband was made redundant several months ago, so has set up a limited company & is doing consultancy work. When drawing a salary do we have to work out & pay tax/nic each month? Or does he need to complete a self assessment at the end of each year? We haven’t yet registered for PAYE. Also is he able to claim travel expenses through the business to/from clients? Thank you.

Comments

  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Name Dropper First Post First Anniversary
    If he wants to draw a salary then, yes, the company needs to set up a PAYE scheme and calculate/pay tax/nic and make RTI submissions to HMRC for each pay period (week or month). You/he need to take care when deciding how much to pay - many factors determine the optimal amount - a mix of salary and dividends is usually the best solution.

    Yes, if he's personally incurring costs which are wholly, exclusively and necessarily incurred for the business, he can prepare expenses claim forms and reclaim the money from his ltd co, just as he would for a normal employment. You'd need to research the rules about allowability.

    He may also have to complete SA tax returns to declare the wages and dividends. HMRC may ask for it, or if he has a personal tax liability (maybe on dividends), he may have to complete one to advise his liability.

    You may be best to get an accountant on board now to give proper advice in these areas. By the sound of it, you'll need one for the year end accounts/returns anyway, and charges are about the same either way so it's a win-win to have advice to stop mistakes being made and planning opportunities being lost.
  • comeandgo
    comeandgo Posts: 5,742 Forumite
    First Anniversary Name Dropper First Post
    Your husband is an employee of the ltd company so any wages have to be dealt with as PAYE. What I usually see with dir etors in ltd companies is they take a low wage, less than 10,000 a year and take dividends, this is more tax efficient but get advice from your accountant as it may give problems if you need a mortgage later.
    Travel expenses while on business is acceptable, keep receipts in case HMRC do an audit. Would a company car be better for your husband? Again your accountant will advise.
  • trailingspouse
    trailingspouse Posts: 4,035 Forumite
    First Anniversary First Post
    Accountant, accountant, accountant.


    We can all tell you what we do - but that might not be appropriate in your situation. For example, myself and OH are 50:50 directors of our limited company. We both take a small salary, and pay ourselves the bulk of our income in dividends. But if you already have a job and/or have no interest/skills in your husband's industry, that wouldn't work for you.
    No longer a spouse, or trailing, but MSE won't allow me to change my username...
  • fishybusiness
    fishybusiness Posts: 1,263 Forumite
    Agree with above - we both take out of our company, but up to lower tax threshold due to our own circumstances.

    Accountant is best placed to advise you.
  • phill99
    phill99 Posts: 9,093 Forumite
    First Anniversary First Post
    Always employ the services of an accountant. It may cost you £500 a year but it will pay for itself over and over again.
    Eat vegetables and fear no creditors, rather than eat duck and hide.
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