Stupid Question....

[bigeasy]

Hi All,

Please don't laugh at me, I'm new....
How do I take money out of the company, ie. pay myself?
I've just started a small shop and am doing ok, I own the company and am the sole director. I don't want to pay myself a set amount every month, I just want to take some money here and there whenever I need it.
My mrs' wages is enough to cover everything we need in life, I just want to be able to take a small amount (not enough to pay tax on) for luxuries every now and then.

Any advice?

 

[Optegris]

I'm sure you will get an "accountant qualified" answer soon but basically any money you take out of the company for your own personal use goes under a directors loan. Effectively your own company is lending you the money.

Now directors loans do need to be paid back by a certain point (which escapes me right now) or you will pay a fine when it comes round to your annual return. The loan is repaid to the company either by you paying money back in or declaring a dividend on the profits of the company.

I'm sure you will get a more detailed response soon (maybe even correcting what I've said ) but that's the basics...

 

[Deleted member 130387]

Ask your accountant....

 

[vvaannmmaann]

This may help.
http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/self-employed-income.htm

 

[smo]

I'm sure you will get an "accountant qualified" answer soon but basically any money you take out of the company for your own personal use goes under a directors loan. Effectively your own company is lending you the money.

Now directors loans do need to be paid back by a certain point (which escapes me right now) or you will pay a fine when it comes round to your annual return. The loan is repaid to the company either by you paying money back in or declaring a dividend on the profits of the company.

I'm sure you will get a more detailed response soon (maybe even correcting what I've said ) but that's the basics...

Er no, i wouldnt have though that applies here.

What you need to do is set up your payroll and pay yourself the minimum monthy salary to be tax free, yet qualify for your class 1 national insurance stamp (means you get a state pension!)

The current allowance is £7475 for tax free drawings (yearly)
From April 2012 this rises to £8105

Anythign you draw above this is probably best taken as dividends but that is for your accountant to advise.

 

[bigeasy]

Cheers Guys,

My accountant phoned me back about 10 mins after I posted the thread. He's advised me that because I don't want to take a regular amount every month (not yet anyway) I can take what I need as a directors loan, document it as such on my spreadsheet of incomings/outgoings, then at the end of the year pay myself the amount I've taken as a dividend.

 

[Zara Accountancy]

Hi there, as long as your business is making enough money you really should be paying yourself a tax free salary of 589 a month which is equivalent to 7068 a year.

This is because this is tax and NI free for you, gives you your entitlement to certain State benefits, and reduces the Corporation Tax payable by your company.

I would recommend having another word with your accountant.

 

[bigeasy]

Hi there, as long as your business is making enough money you really should be paying yourself a tax free salary of 589 a month which is equivalent to 7068 a year.

This is because this is tax and NI free for you, gives you your entitlement to certain State benefits, and reduces the Corporation Tax payable by your company.

I would recommend having another word with your accountant.

Hi Zara,

I fully intend to do that, I've only been in business since February so I'm trying to build up a bit of a cash fund in the business as I started on a shoestring and I'm supplied pro-forma at the moment. I need cash in the bank to pay for materials that sometimes I don't get paid for until a few weeks after I've paid for them. Once I've got a nice cash buffer I'll start paying myself a small wage.

 

[Zara Accountancy]

To clarify, what I mean is that you should be paying yourself a salary instead of a dividend as up to the limits mentioned your salary will be tax free but you have to pay tax before you can take out a dividend.

It does not matter that the amounts are variable, your accountant should be able to set you up with a simple process to pay yourself.

 

[Talay]

If you don't utilise you personal tax allowance you are effectively paying corporation tax on that amount when you don't need to.

If an accountant does not know that, which is on the first line of Accountancy 101, perhaps your first job is to find a proper accountant.