Micro Limited Company - Help with taking a director’s salary

[Sammy1]

Hi all,



I started a limited company at the start of the year (2024), which sells bracelets on eBay and Etsy. The company is turning over a small profit of about £200 a month.



I would like to pay myself about half of the profit and let the company keep the other half. From what I have read, I should take a director’s salary. due to the low amount being paid neither the company nor I would be required to pay any national insurance. Thus do I just state my salary on the micro accounts and then do a self assessment tax return?



Also is it an issue if the company has not been paying me a salary for the past few months or can payment be made whenever as agreed by the company and director? If possible I would like to take a lump sum as a salary at the end of each year that differs based on profit performance.



Any advice on the above will be greatly appreciated.



Kind regards,

Sam

 

[Joyous]

The company is turning over a small profit of about £200 a month.

I would like to pay myself about half of the profit and let the company keep the other half.

Hi Sammy

From reading the above it sounds as if you're only going to be taking a salary of around £1200 a year from your company. You are correct that the low amount will mean that no national insurance is payable. If indeed that's your only income then no tax will be payable either.

Thus do I just state my salary on the micro accounts and then do a self assessment tax return?

Yes, just put the salary through your accounts along with all the other costs. As the amount is so small, you shouldn't need to do a tax return unless you have other taxable income to declare or unless you usually file a return with HMRC

Also is it an issue if the company has not been paying me a salary for the past few months or can payment be made whenever as agreed by the company and director? If possible I would like to take a lump sum as a salary at the end of each year that differs based on profit performance.

Fow a salary that small a lump sum payment at the end of the year should not be a problem. One of the benefits of being a company director is that you're under no obligation to pay your salary monthly.

 

[Sammy1]

Thank you, this was very helpful!

Two questions:

One, I don’t have any other taxable income and have not previously needed to file a return with HMRC. Please correct me if I am wrong – As long as my salary is below the Lower Earnings Limit (£6,396 in 2024/25) I do not need to go through PAYE and if I don’t have any other untaxed income I will not need to do a self-assessment tax return?


Two, at what point do you think making a lump sum payment is not recommended – over the personal allowance?



Thanks again,

Sam

 

[Joyous]

From HMRC's website:

You must register for PAYE if any of the following applies to an employee in the current tax year (since 6 April):

• they’re paid £123 or more a week
• they get expenses and company benefits
• they’re getting a pension
• they’ve had another job
• they’ve received Jobseeker’s Allowance, Employment and Support Allowance or Incapacity Benefit

As you're only paying yourself £100/month, and assuming none of the other points apply, no PAYE scheme is needed and no need to register for self assessment.

To avoid any complications caused by lump sum payments, accrue your salary every month even if you don't take it. Any salary you don't take sits on your director's loan account as an amount owed to you by the company.

Once you start paying above the LEL set up a PAYE scheme and start running monthly payrolls.

 

[Newchodge]

You need to be very careful when paying a bonus at the end of the year. If the bonus takes your total earnings over £6,396 for the whole year, you MUST put it through payroll and report it to HMRC.

 

[Frank the Insurance guy]

I assume that you have a Ltd company? If not and you are a sole trader, the above answers will not apply.

 

[Newchodge]

I assume that you have a Ltd company? If not and you are a sole trader, the above answers will not apply.

First line, first post

 

[Frank the Insurance guy]

First line, first post

Doh!...Its been a long day!......Please delete my useless and irrelevant post!