Single director company and PAYE scheme

Discussion in 'Accounts & Finance' started by Simon26, Nov 24, 2014.

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  1. Simon26

    Simon26 UKBF Newcomer Free Member

    3 0
    Hi,

    Do you need to have a PAYE reference/scheme set up to pay a director in the year if you were only going to pay that director below the NI threshold?

    This would be the directors only employment and would likely only take £7k salary with the rest as dividends?
     
    Posted: Nov 24, 2014 By: Simon26 Member since: Nov 24, 2014
    #1
  2. Newchodge

    Newchodge UKBF Big Shot Free Member

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    If you are payin below £111 per week, and the director has no other income, then no.
     
    Posted: Nov 24, 2014 By: Newchodge Member since: Nov 8, 2012
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  3. LeeroyBrown

    LeeroyBrown UKBF Newcomer Free Member

    7 2
    Helloooo

    It depends really, there are a few NI thresholds. If you pay yourself at or below the lower earnings limit (£111 p/w) then you do not have to register for PAYE. However it is more tax efficient to pay yourself at the secondary threshold (£153 p/w) because you get more corporation tax relief through your company but still don't pay any NI. You would however have to register for PAYE and submit RTI returns at that threshold.

    It is usually better to register for PAYE in case you need proof of your income at some stage, and contributions are being made on your behalf towards your state pension and other benefits (even though you don't actually pay anything).

    Just to confuse matters, with the new employer's NI relief it would be even more (albeit slightly) tax efficient to pay yourself up to the personal allowance threshold (£192 p/w) as you will reduce your corporation tax even more. However putting through this amount will mean you have to make regular payments to HMRC for employees NI.

    Hope that helps.
     
    Posted: Nov 24, 2014 By: LeeroyBrown Member since: Nov 20, 2014
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  4. Simon26

    Simon26 UKBF Newcomer Free Member

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    Thank you. Very helpful. Better set one up really. I was under the impression that you could lay up to the primary threshold and not have to have a PAYE scheme. Obviously not.

    Anyone got any decent and very easy to use RTI software? Free of course. Is HMRC's basic one ok?
     
    Posted: Nov 24, 2014 By: Simon26 Member since: Nov 24, 2014
    #4
  5. kevin.doran

    kevin.doran UKBF Ace Full Member - Verified Business

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    HMRC's will be fine.
     
    Posted: Nov 24, 2014 By: kevin.doran Member since: Nov 28, 2011
    #5
  6. LeeroyBrown

    LeeroyBrown UKBF Newcomer Free Member

    7 2
    No problem, you can pay up to the primary threshold without setting up a scheme, it's the secondary threshold where it becomes mandatory.

    HMRC's software will be okay for you or a cheap alternative is Moneysoft Payroll, from memory I think it's about £50 +vat for the year :)
     
    Posted: Nov 24, 2014 By: LeeroyBrown Member since: Nov 20, 2014
    #6
  7. Newchodge

    Newchodge UKBF Big Shot Free Member

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    I strongly recommend Moneysoft. It is very straightforward and easy to understand. If you are interested in the possibility of outsourcing, feel free to drop me a PM.
     
    Posted: Nov 24, 2014 By: Newchodge Member since: Nov 8, 2012
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  8. Simon26

    Simon26 UKBF Newcomer Free Member

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    Thanks for the replies. So paying £7955 in the 14/15 year would not require a PAYE scheme to be set up?
     
    Posted: Nov 24, 2014 By: Simon26 Member since: Nov 24, 2014
    #8
  9. Newchodge

    Newchodge UKBF Big Shot Free Member

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    No. If you pay more than 5772 in 14/15 requires payroll. If you paqy someone less who has a less than straightforward tax code you may alsoi need a payroll scheme.
     
    Posted: Nov 24, 2014 By: Newchodge Member since: Nov 8, 2012
    #9
  10. john1989

    john1989 Guest

    0 0
    Payroo. Free and better than HMRC's software.
     
    Posted: Nov 25, 2014 By: john1989 Member since: Jan 1, 1970
    #10
  11. kevin.doran

    kevin.doran UKBF Ace Full Member - Verified Business

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    I strongly recommend Moneysoft too for anybody with real payroll needs, a single director such as the OP can easily get away with HMRC's free software though or evenBrightPayas a 'nicer' alternative..
     
    Posted: Nov 25, 2014 By: kevin.doran Member since: Nov 28, 2011
    #11
  12. Christian Green

    Christian Green UKBF Newcomer Free Member

    1 0
    I know this is an old thread. But it falls under the questions I have. I am in the same position of just having set up a Ltd. co. and being the Director and only "employee".

    • Am I right in understanding that if my salary is under the weekly threshold for NI contributions, then I do not register for PAYE?
    • If this is the case, do I simply declare my earning on my end of year self-assessment form?
    • How is best to record this is my financial records? If I haven't registered for PAYE (because I am under the weekly threshold), should I simply include my salary on the monthly expenditure section of my Profit/Loss sheet?
    • I plan to also pay myself dividends from monthly profits to make up a decent overall "wage" from the company. Should the dividends paid go down on the company's balance sheet?
    Please be kind in your replies. I understand I need an accountant, and until I can afford to pay for the service, I am trying to find out as much information as I can on my own. Unfortunately I am guilty of rushing into registering the Ltd. co. without knowing what I was getting in to, hence why I am now asking the questions.

    Any and all advice would be very much welcome.


    Warm Regards,

    Christian Green.
     
    Posted: Aug 19, 2016 By: Christian Green Member since: Aug 19, 2016
    #12
  13. justintime

    justintime UKBF Regular Free Member

    483 66
    Hi Christian.

    On the SA record your salary under the employment section.

    Record your salary in the profit and loss, and put any dividends you take to the Directors Loan account on the balance sheet. At the end of the financial year you clear your DLA with the retained profit you have.

    That last bit is extremely important, as dividends can only be taken if the Company has made a profit. After deducting 20% Corporation Tax, what's left is the retained profit. If insufficient profit is made then tax is due on the balance owing on the DLA.

    I would definitely recommend you take an accountant on board. A lot of people see it as an expense, when they should view it as paid for advice. A decent accountant will reduce stress and worry and enable you to concentrate on the business itself. If you engage one as you start, rather than last minute, you spread the cost over the 12 months rather than a lump sum at the end of the year.
     
    Posted: Aug 19, 2016 By: justintime Member since: Apr 12, 2009
    #13
  14. SteLacca

    SteLacca UKBF Ace Free Member

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    It is not a good idea to pay yourself below the LEL if the company is your only source of income. Although it appears to simply avoid administration, it also means that you do not get your NI credits, which if the company is long term, could mean that you do not pay enough NI to qualify for full pension.

    As others have said, pay up to the primary threshold. This will get you the full NI credit, whilst still not paying tax or NI. Oddly, for straightforward cases, the optimum salary is £8,112 (secondary threshold) rather than £8,060 (primary threshold), since although a small amount of employee's NI will be paid at 12%, the company will get relief on the extra £52 at 20%.
     
    Posted: Aug 19, 2016 By: SteLacca Member since: Jun 16, 2016
    #14
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