Any disadvantage in paying myself annually?

Discussion in 'Accounts & Finance' started by Donna77, Aug 19, 2014.

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  1. Donna77

    Donna77 UKBF Contributor Full Member

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    Hi,
    As a director and the only employee of a new business (limited), for which I don't intend taking any salary or dividends for the first 18 months or so, but instead put everything back into the business, is there any major disadvantage to paying myself annually in order to avoid completing payroll every month?
    Thanks
     
    Posted: Aug 19, 2014 By: Donna77 Member since: Jan 30, 2014
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  2. SBlundell

    SBlundell UKBF Enthusiast Full Member - Verified Business

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    None at all: http://www.hmrc.gov.uk/payerti/reporting/when-to-report.htm#6

    You will of course need to think about timing for maximum efficiency / tax relief in personal tax years etc but no harm in paying yourself once a year.

    Depending on circumstances, usually the best way to pay yourself is a mixture of salaries and dividends - but dividends can be paid at any time and are nothing to do with RTI / PAYE so would make no difference to the annual salary declaration.
     
    Posted: Aug 20, 2014 By: SBlundell Member since: Aug 10, 2011
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  3. Donna77

    Donna77 UKBF Contributor Full Member

    69 11
    Thanks for the advice Sam. I'm currently registering with HMRC and hope to hand over this burden of 20 different HMRC logins/passwords/activication codes and the thrill of their nonsensical websites to a professional really soon. [Rant coming] I genuinely had no idea that the tax system in this country was so inaccessible to educated adults who are computer literate! I owned a business in Turkey and had to deal with their tax office in my intermediate Turkish and it was far, far easier. No exaggeration.
     
    Posted: Aug 20, 2014 By: Donna77 Member since: Jan 30, 2014
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  4. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

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    Forgetting to do it when it's due.

    Monthly payroll really isn't that much of a burden. If you use a decent software package it can be done in a matter of minutes.
     
    Posted: Aug 20, 2014 By: MyAccountantOnline Member since: Sep 24, 2008
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  5. Newchodge

    Newchodge UKBF Big Shot Free Member

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    I would second that and recommend Moneysoft as very good payroll software.

    Paying yourself annually is only a problem if you need money during the year. It would be a breach of RTI to pay yourself money and declare it via RTI annually in arrears.
     
    Posted: Aug 20, 2014 By: Newchodge Member since: Nov 8, 2012
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  6. kevin.doran

    kevin.doran UKBF Ace Full Member - Verified Business

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    You'll likely want this http://www.hmrc.gov.uk/news/annual-schemes.htm

    As you're not intending to physically withdraw the funds, you'll simply credit them to your DLA to be taken at a future date.

    Are you using any specific bookkeeping software?
     
    Posted: Aug 20, 2014 By: kevin.doran Member since: Nov 28, 2011
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  7. KM-Tiger

    KM-Tiger UKBF Legend Full Member - Verified Business

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    Will you have another income during that period? If you don't, you will be discarding your personal allowance.
     
    Posted: Aug 20, 2014 By: KM-Tiger Member since: Aug 10, 2003
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  8. kevin.doran

    kevin.doran UKBF Ace Full Member - Verified Business

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    I think she means she plans to declare a salary but simply not withdraw it.
     
    Posted: Aug 20, 2014 By: kevin.doran Member since: Nov 28, 2011
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  9. KM-Tiger

    KM-Tiger UKBF Legend Full Member - Verified Business

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    Ahh, I see!
     
    Posted: Aug 20, 2014 By: KM-Tiger Member since: Aug 10, 2003
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  10. Donna77

    Donna77 UKBF Contributor Full Member

    69 11
    Hi,
    Thanks for the replies. I have other income during the year. I was intending to reinvest in stock, rather than take a salary. I think that my personal allowance won't apply as I have other income. For software I downloaded BASIC from HMRC, but because I need other accountancy advice I think I will speed up getting an accountant for the business. Thanks again.
     
    Posted: Aug 21, 2014 By: Donna77 Member since: Jan 30, 2014
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  11. kevin.doran

    kevin.doran UKBF Ace Full Member - Verified Business

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    Then avoiding paying yourself a salary would certainly make sense.

    Although I'm biased, I would agree building a relationship with an accountant from the off is very important. So many leave it for 12-18 months until their first accounts are due by which time the books can be in quite a pickle.
     
    Posted: Aug 21, 2014 By: kevin.doran Member since: Nov 28, 2011
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