Director Salary more then profits

Original Post:

M

MhJ

Free Member
Feb 3, 2024
15
0
  • #1
    Hi,


    Can I pay myself salary as a director up to the tax free allowance, even if the company profits are very low proportionally to the 12k allowance? Do this each year until its making more profit then 12k and starts recovering by it self?

    But from the point of HMRC, is this reasonable expense? I would say yes. Reasons: It uses the allowances and legal methods to reduce tax liability. Evidence of work, will be passed easily. What ever salary I assign, its my effort that has to be expensed. While later taking all salary to Director loan, has nothing to do with the expense actually.

    Any opinions on my judgement? I will soon be a accountant, so it should be a good understanding or am I a tax avoider😆


    Thanks to all.
     
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    T

    Tables Force

    Free Member
    Aug 23, 2023
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  • #2
    You can pay yourself whatever salary you want, irrespective of the profits (it's when taking dividends, as a shareholder, that you look at profits).


    Although it is my understanding, and maybe one of the accountants on here can confirm, if you don't actually pay the salary within 9 months of YE it will be non-allowable for CT.
     
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    D

    DWS

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    Oct 26, 2018
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  • #4
    Tables Force said:
    You can pay yourself whatever salary you want, irrespective of the profits (it's when taking dividends, as a shareholder, that you look at profits).


    Although it is my understanding, and maybe one of the accountants on here can confirm, if you don't actually pay the salary within 9 months of YE it will be non-allowable for CT.
    Click to expand...
    You just post the salary to the DLA and then it’s paid.
    OP must also bear in mind that they may need to set up payroll with HMRC if over the threshold and submit monthly RTI.
     
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    M

    MhJ

    Free Member
    Feb 3, 2024
    15
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  • #5
    DWS said:
    You just post the salary to the DLA and then it’s paid.
    OP must also bear in mind that they may need to set up payroll with HMRC if over the threshold and submit monthly RTI.
    Click to expand...
    Yes, that's what I was thinking, if its converted into DL, then it should be considered as paid. The RTI will be fine, I am starting to do it.
     
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    M

    MhJ

    Free Member
    Feb 3, 2024
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  • #6
    Tables Force said:
    You can pay yourself whatever salary you want, irrespective of the profits (it's when taking dividends, as a shareholder, that you look at profits).


    Although it is my understanding, and maybe one of the accountants on here can confirm, if you don't actually pay the salary within 9 months of YE it will be non-allowable for CT.
    Click to expand...
    thanks, about the 9 months to be deductible for CT, how did you conclude that? are you not confusing with the 9 months for returning loan from director to company? that's something else. If its other way around, like the company needs to give money back to director, there are not any restrictions I believe.
     
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    M

    MhJ

    Free Member
    Feb 3, 2024
    15
    0
  • #7
    Tables Force said:
    You can pay yourself whatever salary you want, irrespective of the profits (it's when taking dividends, as a shareholder, that you look at profits).


    Although it is my understanding, and maybe one of the accountants on here can confirm, if you don't actually pay the salary within 9 months of YE it will be non-allowable for CT.
    Click to expand...
    oh yeah found it. I will check it further. Thanks
     
    Upvote 0
    M

    MhJ

    Free Member
    Feb 3, 2024
    15
    0
  • #9
    Tables Force said:
    You can pay yourself whatever salary you want, irrespective of the profits (it's when taking dividends, as a shareholder, that you look at profits).


    Although it is my understanding, and maybe one of the accountants on here can confirm, if you don't actually pay the salary within 9 months of YE it will be non-allowable for CT.
    Click to expand...
    I think you are wrong, if you interested see links below. am going to sleep now.

    eim42260

    eim42310
     
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    JEREMY HAWKE

    JEREMY HAWKE

    Business Member
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    Mar 4, 2008
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  • #10
    You can simply do this as the revenue will be getting money from the tax on your salary

    One dodgy adviser here about 25 years ago was advising directors just to take the salary and pay tax if the company was on rocky ground
     
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    MyAccountantOnline

    MyAccountantOnline

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    Sep 24, 2008
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  • #11
    As an aside is it actually beneficial for you to have a limited company with the current level of profits?
     
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    Elliot Green

    Elliot Green

    Business Member
    Nov 4, 2003
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    www.oliverelliot.co.uk
  • #12
    MhJ said:
    I think you are wrong, if you interested see links below. am going to sleep now.

    eim42260

    eim42310
    Click to expand...
    Those links don't refer to the Section 455 tax.
     
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    fantheflames

    fantheflames

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    Nov 23, 2022
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    fantheflames.co.uk
  • #13
    MyAccountantOnline said:
    As an aside is it actually beneficial for you to have a limited company with the current level of profits?
    Click to expand...
    This was my thinking! Perhaps transferring to sole trader might be better and tax efficient if OP wanted to take out a higher salary. But OP should speak to an accountant for professional advice.
     
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