How to pay our selves?

[Isedo]

Hi folks, just opened a new company which is selling digital products online. It's an LTD but both the directors are not resident in UK.
Which is the best way to pay ourselves month by month?

How the taxations works? The money we give to ourselves are considered as diretcors loan or can be considered as salary?
Can the salary be not fixed? Let's say one month we earned 5K so we take each 2K? Just an example.

Any advice on this in order to make it right?
Thanks a lot

 

[Scalloway]

You need to understand personal tax in the country of your residence.

Salary your company your company pays is allowed as a deduction from profit for tax. Taking out a director's loan will make the compnay liable for addtional tax.

You can pay yourseves whatever sum as salary you think is appropriate, bearing in mind what the company can afford.

 

[Gyumri]

Any advice on this in order to make it right?
Thanks a lot

It might be worth drawing a dividend instead of paying tax in the uk on a salary. - but that depends on where you are resident for tax purposes.

This type of question can only really be dealt with by an accountant who knows your situation. "A good accountant should cost you nothing."

A loan to an active director who is not also drawing a salary might be regarded as disguised remuneration and thus subject to PAYE. Again, an accountant should be able to advise.

 

[Isedo]

Thanks man, apreciate your answer. Can u explain it to me better please so I'm sure to understand properly, my brain is somehow dixlessic so i'm having hard time understand "legal" and "accounting" thinking.

Of course the idea is the pay our selves only with what the company can afford. So let's say we do 80.000 or 100K in one year as projection. Just example.

Can we take each 3.000 per month?
Can we take one month 3.000 and one month 2.000 and the other 5.000?

As non uk residents, do we have to pay taxes on this in UK or only in our resident country?
Is the salary considered as expenses for the company so it's tax deductible?

For example:
If at the end of this month we sent from the LTD Bank Account 3.000 to our personal bank accounts, is that ok as salary? I mean, do we have to activate some kind of "salary declaration"?

Thanks mate

 

[Isedo]

It might be worth drawing a dividend instead of paying tax in the uk on a salary.

Can u draw dividends only at the end of the year or also month by month or when u need? How much you pay on dividends?

 

[Gyumri]

The company can declare a dividend at any time provided there is sufficient profit to justify the dividend. You pay tax according to where you are resident for tax purposes so check what the tax is in your country for dividends.

 

[Gyumri]

If you are shareholders as well as directors then you may find it better to draw a dividend than pay a salary and pay tax in the uk.

If there is a double taxation treaty between your country and the UK then you will only need to pay tax on your dividend in your country.

You will need an accountant for your business to advise you properly depending on your position.

 

[Isedo]

Thanks for your answers, yes I will need for sure an accountant soon. I'm just trying to understand how it works so thanks so much for your answers guys.

 

[WaveJumper]

A good lesson on why should not to set up a ltd company until you understand the basics of running your accounts and payroll. If you turnover is going to be anywhere near what you think as above go and sit down with an accountant and get your house in order now before you get any further down the road and create yourselves an even bigger headache.

Not mentioned here but if company is in UK and your overseas where does your stock get landed and distributed from for tax purposes, have you looked into this?

 

[Isedo]

A good lesson on why should not to set up a ltd company until you understand the basics of running your accounts and payroll. If you turnover is going to be anywhere near what you think as above go and sit down with an accountant and get your house in order now before you get any further down the road and create yourselves an even bigger headache.

Not mentioned here but if company is in UK and your overseas where does your stock get landed and distributed from for tax purposes, have you looked into this?

What so u mean by stock?

Yes I'm looking for a good accountant, not that easy so this is why I'm trying to learn a figure out these things by my self. My previous experience in Business tought me: have a great account but learn the ropes by your self so you can check on your accountant.

 

[MBE2017]

What so u mean by stock?

Yes I'm looking for a good accountant, not that easy so this is why I'm trying to learn a figure out these things by my self. My previous experience in Business tought me: have a great account but learn the ropes by your self so you can check on your accountant.

Nothing wrong understanding how to run your company, but you need to be advised correctly first. Contact an accountant, talk, ask questions, listen too the answers.

This is one area you will not regret spending on for advice based on this thread.

 

[Scalloway]

What so u mean by stock?

In accounting terms it means goods you buy for resale.

Can I ask if you set up a UK company because it is easier than setiing up a business in your own country?

 

[STDFR33]

Nobody in the UK can help you with regards to taxation.

Personal and corporate taxes will more than likely be liable in your country of residence.

 

[WaveJumper]

What type of digital products do you sell

 

[Isedo]

In accounting terms it means goods you buy for resale.

Can I ask if you set up a UK company because it is easier than setiing up a business in your own country?

Thanks. Yes I asked about stocks since I mentioned that we are selling digital products so there are no stocks of physical products.

We setup the company in UK for a bunch of reasons. One is for sure that it's easier to setup it in Uk. Second one is that i prefer to pay company taxes in a Country i feels cares about it's citizens even if I'm not one. There are of course other reasons but there is nothing shady behind this.

 

[Isedo]

Nobody in the UK can help you with regards to taxation.

Personal and corporate taxes will more than likely be liable in your country of residence.

I'm asking because i need to understand the first part: if we pay ourselves as salary, can we just decide to take 2K one month and 3K another and nothing the following month?

I need this to be considered as an expense because we technically work so it is an expense.
I need it to not be considered as directors loan.

Of course than we are going to pay taxes in our resident country.

 

[Isedo]

What type of digital products do you sell

Widgets for wordpress, courses and similar.

 

[Scalloway]

if we pay ourselves as salary, can we just decide to take 2K one month and 3K another and nothing the following month

You can pay yourselves any amount you wish as salary as long as it is properly accounted for.

 

[WaveJumper]

For what purpose did you require a UK ltd company

 

[TheSkyisGray]

You don’t choose where you pay tax. If you are running the company overseas then it is likely the company will pay tax there. Put your local accountant in touch with your UK accountant. I doubt there will be many savings to be made with two lots of professional fees and potential double taxation!!