PAYE for Employers

[Neclord]

Hi everyone.

I've started a Ltd company on 01.06.2015 to run some of mine translation offers through it. However, many other things went in my way, including a different full time job offer, and several of my "to be customers" delaying their projects for at least a few weeks.

End result is that it's already middle of July, and my company had no activity whatsoever. I have also registered for PAYE for Employers at the end of July, and I should activate it latest in the next few days (as the letter says the activation code is only valid for 28 days).

My questions are: when registering for PAYE I had to state how many employees will it be, and when do I expect the first salary to go through. I've selected 1 employee (which is me), and first salary date as 01.07., as I planned to pay myself a salary on the beginning of every month. However, I haven't done any trading, so there's nothing to pay, so I also haven't activated PAYE, since it might take some time before I get some income from this.

Are there any repercussions to what I did? Can I just let the PAYE expire then?

Second question would be: since I'm now expecting only a minor income from this, do I even need PAYE? I doubt I'll ever go over any threshold for tax and NICs.

Final question: as my income from the company will now be very irregular, and often non-existant, how do I pay myself? The company could have no income this month, £50 next month, then again nothing, then maybe a very busy month and draw in over £500. How do I properly pay myself, and properly file it?

Thanks everyone!

 

[MyAccountantOnline]

When you registered as an employer you may remember you received an email which said you must ensure you report to HMRC when you pay employees and when you havent paid any employees in a tax month (RTI reporting).

If you fail to submit RTI reports you will incur penalties.

Whether you still need or should be running a payroll depends on your personal circumstances. If you have no other income you may well still want to pay a salary via the company even if you dont actually draw it out to both use your personal tax free allowance and save your company Corporation tax.

 

[Scalloway]

If you have signed up for PAYE you will need to make RTI submissions otherwise you will get penalties from HMRC. Free software is available to do this.

If you are already on PAYE then you are currently better off paying yourself dividends. The company must have available profit.

Alternatively you can run a payroll and credit the sum due to your Director's Loan Account. This money can be withdrawn when funds are available.

 

[Neclord]

When you registered as an employer you may remember you received an email which said you must ensure you report to HMRC when you pay employees and when you havent paid any employees in a tax month (RTI reporting).

If you fail to submit RTI reports you will incur penalties.

Thanks for the reply! Hmm, that's odd. I've only gotten one email, which was this:

"You recently enrolled for the PAYE Online for Employers service. The Activation PIN that has been sent to you, will expire on 2015-07-17T02:26:00+01:00.

If you do not activate the service before your PIN expires, you will not be able to access the PAYE Online for Employers service and will need to repeat the enrolment process, wait for another Activation PIN to be posted to you and then activate the service."

Do I still have to submit any info, even though I haven't activated this service, and haven't done anything with the company?

If you have signed up for PAYE you will need to make RTI submissions otherwise you will get penalties from HMRC. Free software is available to do this.

If you are already on PAYE then you are currently better off paying yourself dividends. The company must have available profit.

Alternatively you can run a payroll and credit the sum due to your Director's Loan Account. This money can be withdrawn when funds are available.

Thanks for the reply! Signed up, yes. However I still haven't activated it. What free software would you recommend?

Just out of curiosity, why should I credit the Director's Loan Account, and with what sum? Maybe I should rephrase this: if I didn't earn anything, why should I run a payroll and credit it to DLA? If there is a certain figure I have to use, and if my income is always under it, wouldn't that mean that I'm just increasing the DLA all the time, and never bringing it back to zero?

 

[MyAccountantOnline]

I think maybe you are confusing registering with HMRC as an employer and then registering to use online services?

 

[MyAccountantOnline]

Just out of curiosity, why should I credit the Director's Loan Account, and with what sum? Maybe I should rephrase this: if I didn't earn anything, why should I run a payroll and credit it to DLA? If there is a certain figure I have to use, and if my income is always under it, wouldn't that mean that I'm just increasing the DLA all the time, and never bringing it back to zero?

You can do this if you want to take a salary without physically paying it to use your tax free personal allowance and save the company tax.

 

[Neclord]

I think maybe you are confusing registering with HMRC as an employer and then registering to use online services?

Thanks for the replies! Hmm, I think not. I can already login to online.hmrc.gov.uk, and then there I signed up (last month) for PAYE for Employers, received the code, but haven't used it to activate the service as absolutely nothing happened with me or the company.

You can do this if you want to take a salary without physically paying it to use your tax free personal allowance and save the company tax.

I wouldn't want to bother you with follow up questions, which I would have since I'm not clear with the concept of "taking a salary without actually paying it", and to be perfectly honest I didn't really understand what you wanted to say here, so I'll first try to google about it

I'm not at all knowledgeable about this, so I just have to ask this though: do I have to pay myself a salary, even if I'm not earning anything?

 

[john1989]

wouldn't want to bother you with follow up questions, which I would have since I'm not clear with the concept of "taking a salary without actually paying it", and to be perfectly honest I didn't really understand what you wanted to say here, so I'll first try to google about it

You can credit the salary to your directors loan account. Money can then be taken from a directors loan account that is in credit when funds permit.

do I have to pay myself a salary, even if I'm not earning anything?
No, but if you don't have any other income it would be advisable to do so.

 

[Neclord]

No, but if you don't have any other income it would be advisable to do so.

why so? because HMRC would be curious how I'm surviving or some other reason? I'm married, and have some savings, so this is basically me trying to be my own boss. If it doesn't work (which might not seeing how I seem to have already put myself into trouble ) then I'll just wind up the company and get back to being a regular employee.

 

[john1989]

Because you would be incurring a tax deductible for you company. If that creates further losses, then they can be offset against future profits.

It also means you can drawn money from your directors loan account at a later date which will have no tax consequences.

 

[MyAccountantOnline]

why so? because HMRC would be curious how I'm surviving or some other reason? I'm married, and have some savings, so this is basically me trying to be my own boss. If it doesn't work (which might not seeing how I seem to have already put myself into trouble ) then I'll just wind up the company and get back to being a regular employee.

If your income isnt using your tax free allowance its being wasted - you can earn £10,600 for this tax year before paying any tax.

If your company pays you a salary (either physically pays it or adds it to a loan owing to you) you can use that personal allowance to save your company tax.

Ignoring NI, a salary of £10,600 will be tax free income for you and could save your company £2,120.

 

[MyAccountantOnline]

Getting back to your query about PAYE do you actually have a company PAYE scheme in place - you say you registered your company as an employer? Have HMRC sent you a PAYE reference number and Accounts Office reference number?

 

[Neclord]

Getting back to your query about PAYE do you actually have a company PAYE scheme in place - you say you registered your company as an employer? Have HMRC sent you a PAYE reference number and Accounts Office reference number?

I have only received PAYE for Employers activation code letter from HMRC. However, when I login to HMRC services, I can go to PAYE for Employers, where there is an "Activate now" button waiting, and there in the corner I have my company name visible, and under it I have "PAYE Employer reference: 120 / VBxxxxx" (xxxxx being 5 numbers which I'm assuming will be unique to me".

 

[MyAccountantOnline]

I have only received PAYE for Employers activation code letter from HMRC. However, when I login to HMRC services, I can go to PAYE for Employers, where there is an "Activate now" button waiting, and there in the corner I have my company name visible, and under it I have "PAYE Employer reference: 120 / VBxxxxx" (xxxxx being 5 numbers which I'm assuming will be unique to me".

In that case your company is registered as an employer and you do need to submit the outstanding RTI returns.

The registration you havent completed is to enable you to use online services - you can use that to submit Returns to HMRC etc.

 

[MyAccountantOnline]

If you are going to deal with your own payroll and tax affairs you may find this helpful.

 

[Neclord]

In that case your company is registered as an employer and you do need to submit the outstanding RTI returns.

The registration you havent completed is to enable you to use online services - you can use that to submit Returns to HMRC etc.

So, even though I haven't earned anything, or paid myself anything, I still have to submit some salary to HMRC, and for tax efficiency I should credit that amount to DLA every month, even though I might never earn enough to bring DLA to 0?

So my best course of action would be then to activate PAYE, download and use PAYE Basic Tools from HMRC, decide on a salary (what amount should I even use?), and tell HMRC this is what I have paid myself (even though I'm not paying myself anything), then pay them a fine because they'll say I was supposed to pay myself on 01.07. instead of today?

After this, I should pay myself this non-existing salary every 1st from now on, and pile up this amount on DLA?

I envy you guys for actually being able to understand this

 

[MyAccountantOnline]

So, even though I haven't earned anything, or paid myself anything, I still have to submit some salary to HMRC, and for tax efficiency I should credit that amount to DLA every month, even though I might never earn enough to bring DLA to 0?

So my best course of action would be then to activate PAYE, download and use PAYE Basic Tools from HMRC, decide on a salary (what amount should I even use?), and tell HMRC this is what I have paid myself (even though I'm not paying myself anything), then pay them a fine because they'll say I was supposed to pay myself on 01.07. instead of today?

After this, I should pay myself this non-existing salary every 1st from now on, and pile up this amount on DLA?

I envy you guys for actually being able to understand this

You dont have to pay any salary, but you do have to submit an RTI report to HMRC showing whether you have paid any salary or not.

Whether it is worthwhile you taking a salary will depend on many factors and that really isn't the sort of information you want to put on a public forum.

If you are unsure of what you are doing whilst sounding very bias my best advice is that you get an accountant to help - you'll so easily end up paying unnecessary penalties and possibly tax.

 

[Neclord]

You dont have to pay any salary, but you do have to submit an RTI report to HMRC showing whether you have paid any salary or not.

Ah, there we are. To be honest I'm not even sure any more why I even signed up for PAYE for Employers now, since gov.uk pages says you don't need PAYE if you're paying under £112 a week.

Since my company was made on 01.06., and if run PAYE today, when adding employees (only me, that is), can I then make my first salary date as 01.08., or is HMRC going to expect that I have paid myself a salary in June and July as well?

Thanks for the help man!

 

[MyAccountantOnline]

Ah, there we are. To be honest I'm not even sure any more why I even signed up for PAYE for Employers now, since gov.uk pages says you don't need PAYE if you're paying under £112 a week.

Since my company was made on 01.06., and if run PAYE today, when adding employees (only me, that is), can I then make my first salary date as 01.08., or is HMRC going to expect that I have paid myself a salary in June and July as well?

Thanks for the help man!

Man

I can't tell you whether it was wise to register as an employer or not because I dont know your personal circumstances or income but as I said it could potentially save you some £2,120 in tax.

You can pay yourself when you want to, but HMRC need an RTI report even if no employees have been paid.

 

[Neclord]

Man

I can't tell you whether it was wise to register as an employer or not because I dont know your personal circumstances or income but as I said it could potentially save you some £2,120 in tax.

You can pay yourself when you want to, but HMRC need an RTI report even if no employees have been paid.

Whoops. Sorry about that

If I let it expire tonight, does it then simply mean like I haven't registered for PAYE, and can continue laying low and not trading until I actually study the topic better?

If relevant: I won't reach my personal tax allowance this year by any event unless I go in full-time employment (and even then probably not unless I'm very well paid).

 

[MyAccountantOnline]

Whoops. Sorry about that

If I let it expire tonight, does it then simply mean like I haven't registered for PAYE, and can continue laying low and not trading until I actually study the topic better?

If relevant: I won't reach my personal tax allowance this year by any event unless I go in full-time employment (and even then probably not unless I'm very well paid).

No, because you have registered for PAYE you've got a PAYE reference number.

 

[Neclord]

No, because you have registered for PAYE you've got a PAYE reference number.

Bugger.

I'll then activate the service, add myself as an employee/director, and submit all the reports to HMRC. Nothing wrong with this at least, I hope?

 

[Flik]

I may be completely wrong here, but if you haven't traded, or done anything at all, shouldn't you be able to just go to your HMRC online services -> Remove services -> select PAYE for Employers, and then it will ask you if you no longer wish to use it, and then you just select yes?

 

[David Griffiths]

I may be completely wrong here,

That bit is right!

If you cancel online services it doesn't deregister you from VAT or close down the employer's PAYE scheme

 

[MyAccountantOnline]

I may be completely wrong here, but if you haven't traded, or done anything at all, shouldn't you be able to just go to your HMRC online services -> Remove services -> select PAYE for Employers, and then it will ask you if you no longer wish to use it, and then you just select yes?

I may be completely wrong here, but if you haven't traded, or done anything at all, shouldn't you be able to just go to your HMRC online services -> Remove services -> select PAYE for Employers, and then it will ask you if you no longer wish to use it, and then you just select yes?

I think all that will do is stop you be able to use that particular online service, it wont close the PAYE scheme.

If you want to close a PAYE scheme I believe the only way to do is is via RTI - you tick a box on your final submission saying it needs to be closed.

 

[Neclord]

Well, thanks all! I've activated the service, once all my data is available on HMRC online services I'll add myself as an employer/employee using Basic PAYE Tools, and then I'll see what happens next

 

[gploosley]

I think all the posts above have focussed on the short term problem of the PAYE scheme, correctly as penalties may be incurred.

I don't think anyone has yet raised the longer term issue that you probably don't need a company now that you have much lower income than expected.

A company brings responsibilities and costs, unless there are compelling reasons why you need a company e.g. limited liability, with such low income I suggest you look into simplifying your affairs and getting rid of the company.