DIRECTORS SALARY BASICS!
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- Опубліковано 8 вер 2024
- Wondering how your salary works as a director? In this video, Dan runs you through the basics of how it works.
Topics include:
How to pay yourself as a limited company owner
Directors wages
Directors salary
Directors PAYE
Directors payroll
Dividend Allowance
How to pay a dividend
Limited company dividends
£2000 dividend allowance
How dividends work
Shareholder dividends
Director dividends
How dividends save tax
… and more!
Useful blogs:
If you have any questions on this, please comment below.
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#accounting #PAYE #tax #director
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I went with Director’s Salary because I believe being able to show I am employed at a good sized salary will help me to get a mortgage.
One thing I am still figuring out though - The salary is a business expense for the company and goes against corporation tax, but I believe *one* of the two National Insurance payments is and one of them isn’t? I assume the National Insurance I deduct from my salary is a business expense while the NI on the employer side isn’t? I seem to be finding vague and conflicting information on this online.
Firstly, mortgage companies will take dividend income as well. Sometimes in early days can be harder to demonstrate a history but once you have personal tax returns in it’s fairly straightforward.
On other q, effectively both Ni are tax deductible for company. Reason is the company counts your ‘gross’ salary as it’s cost (before tax and NI). The employers NI is generally just an allowable cost in the same way.
Got to the UA-cam settings and set the playback speed to 0.75 . There you go
Works for some people we are told 😀
Helpful. TY so much 💯👌🏽👌🏽👌🏽👌🏽👌🏽
Glad it helped :)
Can you share a more specific example or video on the optimal salary and dividend combination for this tax year? And what’s the minimum NI and Tax to comply with IR35?
Hi Adil, we have a video coming on this for 21/22 tax year.
There’s no min tax / ni to comply with IR35, can you expand on your question?
If I have already reached the maximum for state pension, would my better option be to just pay myself dividends?
Not always, might still be worth if for the corporation tax deduction. A lot depends on your personal earnings situation and goals
Thanks Dan. Very informative, as usual.
Could you possibly make a video on foreign income, more specifically where suppliers are not in the Uk and goods are sold in the US marketplace for example.
In terms of which tax? Company, personal or VAT?
@@HeelanAssociates Personal. Foreign Company, no CFC is triggered, director receives salary + dividends. Is the UK resident employed or self-employed? No PAYE, so taxation happens at Self Assessment?
How do dividend payouts end up being factored into what mortgage you can afford? Is it just the same as salary - i.e.. a few years' track record and the accountant underwrites it?
Mortgage broker can confirm this.
Yes basically. Generally a mortgage broker or bank will ask for copies of your tax calcuation (known as a 'SA302') that prove salary and dividend levels.
Is there anything stopping a sole director of a ltd company from making family members equal shareholders? That way the director could distribute £2,000 yearly tax free dividends to himself and all shareholders... just a thought. Would be great to get your opinion.
In short no there isn’t anything stopping it and actually it’s a fairly common ‘extraction’ strategy.
That said, there are many pitfalls with getting this right, including making sure you have the right shareholding set up, otherwise just paying 2000£ to everyone might be difficult/impossible, especially if one shareholder wanted more.
@@HeelanAssociates thank you for the response! In terms of set up, do you mean ensuring everyone has equal shares? So if I split the shares equally among 5 people including myself, each owning 20% of the business. If the company paid out say £10k in dividends, everyone would received £2k, right?
Also, is there a resource you would recommend with more details on the various “extraction methods”?
Hello. What is the quickest/best way to enter Etsy transactions - via CSV and how or is there ‘sync with Etsy’ on Xero? Thank you
Hi Deborah, yes 'Greenback' app with connect to Xero and do this. It's about to be called Dext Commerce (they've been bought out), but it connects them together.
If director paid wages for 2022-23 £500 per month so yearly £600,is mandatory to register for HMRC FOR PAYRUN?
£6000*
If salary then yes under ‘RTI’ regs should be submitting paye returns on or before each pay day.
Brilliant video and very informative, thank you. What would you recommend to do if i need to have take home more then the 735 per month? Am I able to draw on dividends each month and what happens if i have a tight month where there is no profit so i can’t draw dividends?
Hi, glad you enjoyed. Over £735, if you have accounting profits yes dividends is the normal path for many owners, presuming you have shares that allow you to do so! If no profits = no dividend sadly. Then it's either pay salary or loan yourself the money, but obvious question would be where is the cash to do this coming from.
What if I make 4000 from rental income and I want to pay my self 2800 each month to live on ?
That’s fine, you just have to decide how that £2800 will come out the company, salary , dividend , loan etc
Hello and good evening I hope you are is well. I am starting a CIC at the moment and wondering if I used my my friend as a director and worst scenario I got into debt or something would they be liable? or would they be affected in anyway ? I would be super grateful for this. Thanks George
It's hard to explain really all the potential in a comment, but
They would have directors responsibilities www.gov.uk/running-a-limited-company that shouldn't be taken lightly.
In terms of getting into trouble debt wise, it depends on whether the directors owed money back to the company, how they acted and whether they signed any 'personal guarantees'.
Lets assume i have a company that is trading and loss making; can i pay myself through another limited company as oppossed to Paying myself through my main trading company as PAYE?
Slightly confused on this as imagine there is more to this, but if you are carrying out paid work for any company it's technically possible to operate a PAYE scheme on any one an pay yourself? Whether it's a good idea would depend on a lot more data :- )
On a side note, salary can create a bigger tax loss you can carried forward etc anyway.
Hi there, thanks for your videos, they're great! A few questions through: firstly, if I went with option 2 (all dividends), can I just pay voluntary NI in my self assessments to get my qualifying year, and then avoid the need to setup payroll/PAYE entirely? Then alternatively, if I DID want to take a monthly wage of say, £533, is PAYE even required when I'm not earning enough to pay income tax?
The answer to both questions lies in whether you want a tax deduction in the company for some salary. The reason there is often a small salary (aside from pension record) is to get some form of deduction for some of the salary.
If you want a deduction, you need a PAYE scheme.
@@HeelanAssociates Understood, thanks for your reply, I'm slowly getting to grips!!
Can i pay myself a back dates salary? as have taken nothing from my company since i started it 4 years ago, thanks
For that length of years It’s unlikely that you’d be able to submit the required docs and potentially amend everything needed if the aim was to get it in each correct tax year.
Much depends on what was done and the dates.
Does this also apply to Non Resident Directors?
That needs a more detailed look at, lots to consider there.
Thanks for this video Dan.
I have a question if that's okay. Does a director have to set-up PAYE to pay themselves on a monthly basis or can they simply invoice their ltd every month? And if they do pay themselves on a monthly basis like this, without PAYE, what are the implications? (Is this cost no longer counted as salary/deductible for the company, if they don't use PAYE? Are there fees for paying monthly like this without PAYE?) I've looked online, but can't seem find anything about it, thanks
There are a few issues with this, but the main one being it doesn’t really make sense because you’d need to declare the income on a tax return and pay personal tax on it (potentially).
This can be not great from a tax efficiency point of view, along with a few more issues I can think of.
Hi Mr Dan , thanks for your content please I have question , i'm non-resident on UK even i don't have UK nationality ,
can you tell me what is the legal duties i must to respect when I create UK LTD for example type of Taxes if it applied for Non-Resident.
Thank you .
Hi Fouad, sadly this is more than can be answered in a comment!
@@HeelanAssociates Thank you so much for your reply please would you like to do video explain the details i'm really appreciate your time and effort .
With option 3, is the company still liable for employers NI?
If you pay over the NI threshold and no employers allowance is available, then yes.
Generally owners don't pay that this level.
Have a watch of this one, explained a bit more: ua-cam.com/video/ef2FLBnFPNo/v-deo.html
hello
does the director share split determine how much dividend each director can take out
for example if its a 70-30 split and the profit is £100000, does that mean the director with the 30 split can withdraw £30000 in dividend or can they only take out 30% of the £30000 based on their split?
thanks
It depends how the shares are set up. If both directors held the same 'class', and there was 100,000 to give out, one would have to have 30k and one 70k in your example (generally). Or if you gave out £50k, would be 15k to one, 35k to other.
There are things called dividend waivers that are possible (but that isn't ideal / preferable usually). Normally if you want to change the amount of dividends / give flexibility you'd use different share classes.
thanks for that., for additional directors to receive dividend payments do they need to be added as PERSON OF SIGIFICANT CONTROL or can that already be determined inside the business