Guidance on Backdating Payments for My LTD Company

[simong93]

Hello everyone,

I'm seeking clarity on an issue, and I'm hopeful someone here has the expertise to guide me.

A while back, I was guided by a business mentor to set up my LTD company. Everything seemed to progress smoothly, and based on his advice, I began paying myself a weekly salary of £241. He assured me that he would guide me on how to handle the PAYE setup. After persistent follow-ups over the past four months, we eventually scheduled the PAYE to commence on 25/08/2023. In hindsight, I realize I should have taken the initiative to handle this myself or sought professional advice earlier on. We all learn from our experiences, don’t we?

I’ve tried reaching out to him regarding backdating the previous payments onto PAYE using QuickBooks, but unfortunately, he's gone radio silent. To ensure that everything is above board moving forward, I've hired an accountant. However, before I meet with them, I’d love to arm myself with some knowledge on the matter.

• How can I incorporate the previous payments into the PAYE system?
• Is it possible to invoice my company for the previously paid amount and start afresh?
• Could these payments be considered as a director's loan? If so, can I then process it through PAYE and subsequently repay the company?
• Is it feasible to simply add the cumulative amount to a PAYE slip and continue with my regular weekly payments?

Any insights or advice would be greatly appreciated. Thank you for taking the time to assist.

 

[Newchodge]

Provided you are a director there isn't a major issue.

Which payroll software are you using?

 

[simong93]

Provided you are a director there isn't a major issue.

Which payroll software are you using?

Yeah, i am the only director/employee/shareholder.

I am using QuickBooks, I will admit after reading there documents it's still a huge change from there self-employed setup.

 

[Newchodge]

Yeah, i am the only director/employee/shareholder.

I am using QuickBooks, I will admit after reading there documents it's still a huge change from there self-employed setup.

Ok. Make sure, when you set up your personal 'employee' details on payroll that it shows you have been a director since the day the Ltd company incirporated.

I dont know why you are set up to run payroll from end August - are you running it weekly, as you are paying yourself weekly? What date did you incorporate the company and when did yu first pay yourself ?

 

[simong93]

I will go on and do that now, thank you.

My first payment to myself was on 04/03/2023 and the company was made on 25/10/2022.
I pay myself weekly, it's what he said to do when we sat down and went over everything.

 

[Newchodge]

I will go on and do that now, thankyou you.

My first payment to myself was on 04/03/2023 and the company was made on 25/10/2022.
I pay myself weekly, it's what he said to do when we sat down and went over everything.

Ok, By 25 August you will have received 26 * 241, so £6,266.

5 of those payments (1,205) were in the last tax year. If you try to recover those through payroll this year you will end up paying tax and employee's NI of £385. You cannot backdate to run payroll last year, so I would just leave that money as a director's loan.

When you run payroll on 28 August (weird date) You should show income of £5,302. That is 21 weeks already paid and another week at the end of August. As long as you have put that you were a director from 25/10/2022 there should not be any tax or NI due. Assuming that your tax code is 1257 and that you ticked box A on the new starter's declaration.

You can do that now as long as you don't finalise the payslip or submit the RTI (or FPS)

Try that and let us know how it looks.

 

[simong93]

Just to make 100% sure I'm reading this right, so any payment before 01/04/2023 goes down as a director's loan, I'm guessing the accountant will work their magic and let me know how to sort that.

then on the 25th, I run payroll and edit the payment bit of the payslip to include all previous payments of this tax year of wages and that week's payment. Onto the wage slip, submit it then every Friday just submit £241.73 like normal.

 

[Newchodge]

Just to make 100% sure I'm reading this right, so any payment before 01/04/2023 goes down as a director's loan, I'm guessing the accountant will work their magic and let me know how to sort that.

then on the 25th, I run payroll and edit the payment bit of the payslip to include all previous payments of this tax year of wages and that week's payment. Onto the wage slip, submit it then every Friday just submit £241.73 like normal.

No.

Everything you have already paid yourself should be in your accounts every week as a payment out of the director's loan. So you owe the company £6,266.

Run payroll at the end of August, showing your income that month as £5,302. £241 of that is paid to you as wages, the rext is credited to the director's loan, reducing the amount you owe by £5,061.

It sounds as if your payroll has been set up to pay you monthly. Which is stupid as you pay yourself weekly. If you can, change it to weekly, do so.

Alternatively, if you would like me to quote for doing it for you to the end of the year, please ask for a quote. It won't be much.

 

[simong93]

Okay, I'm with you now, so I've put all of my payments to myself and any money I've put into the business into a Liability Account (Directors Loan), I understand that now it makes sense, thank you so much for your help.

Payroll has been set up for weekly:-

How often do you pay your employees?
Every week
What is their first pay date in Quickbooks?
2023-08-25
What are the days they're being paid for?
2023-08-27

Would you also be able to quote me to look over my QuickBooks and just make sure I've set it up right, categories etc? I know the accountant will do it, but I like to know too.

 

[Newchodge]

Okay, I'm with you now, so I've put all of my payments to myself and any money I've put into the business into a Liability Account (Directors Loan), I understand that now it makes sense, thank you so much for your help.

Payroll has been set up for weekly:-

How often do you pay your employees?
Every week
What is their first pay date in Quickbooks?
2023-08-25
What are the days they're being paid for?
2023-08-27

Would you also be able to quote me to look over my QuickBooks and just make sure I've set it up right, categories etc? I know the accountant will do it, but I like to know too.

As I see it, you pay yourself every Saturday. So why not set up first pay date as 26 August, days paid for to 26 August. Or if you pay yourself on Fridays, make both dates 25 August. The reason the dates are often different is if the employer needs to know what hours employees worked before finalising the payroll. As you are the sole director, that doesn't matter.

See how this works and talk to your accountant, then let me know if you need additional help. Good luck!

 

[MyAccountantOnline]

In advance of getting advice from your accountant you may find this useful to read too - it explains the tax implications of directors loans.