Whats the minimum wage I have to pay myself?

[RBS]

I run my own limited company. Is there a minimum weekly/monthly wage I have to pay myself by law? Do I have to print myself a payslips as well?

 

[elaine@cheapaccounting]

Nothing by law but read here:

Deciding on a salary to pay to a director



http://www.cheapaccounting.co.uk/blog/?p=683

 

[RBS]

Nothing by law but read here:

Deciding on a salary to pay to a director



http://www.cheapaccounting.co.uk/blog/?p=683

Hmm, but website says I have to pay myself something salary or dividends. So, there is a law then? Otherwise - how do I take out money from company bank account - can`t just go to cash machine and withdraw cash?

 

[akirk]

That blog gives the impression that there are only two options - presumably because it expects the reader to be wanting to pay themselves and therefore presents the ways of doing it - it does go on to say that you do not as a director need to comply with the national minimum wage if you have no contract of employment - therefore the simple answer is a minimum payment of £0

Alasdair

 

[elaine@cheapaccounting]

Wording I think ....

You don't HAVE to pay anything!

However if you want to pay something then 3 choices:

- repay any money lent to the business, if any
- pay a salary
- pay a dividend - can only be paid from retained profit

 

[elaine@cheapaccounting]

That blog gives the impression that there are only two options - presumably because it expects the reader to be wanting to pay themselves and therefore presents the ways of doing it - it does go on to say that you do not as a director need to comply with the national minimum wage if you have no contract of employment - therefore the simple answer is a minimum payment of £0

Alasdair

Yes that blog does give that impression as most (not all) directors of a limited company would paid at least min. salary to utilise personal allowance but as a result of a tax planning conversation with their accountant

 

[Philip Hoyle]

Things are more complicated if you're claiming working tax credits:-

1. You are required to pay the minimum wage for the number of hours you work and declare for tax credit purposes.

2. HMRC require your combined wages/dividends to be a realistic value of the work you do for the company if the company can afford to pay it - i.e. you can't allow the company to make a million, not pay yourself any wages nor dividends, and still expect a large working tax credit award!

 

[RBS]

So, here comes my actual idea: I`m willing to buy property and take mortgage for my family(not business commercial). Mortgage lenders are asking for 2 years of trading history or wage payslips. 2 years of trading history won`t work as I formed this company just in April this year, but payslips option sounds good. As I own my company myself - I can pay myself salary and print payslips, therefore I will have paperwork to show lender.

Am I correct? Or payslips cannot be off my own company?

 

[KM-Tiger]

Otherwise - how do I take out money from company bank account - can`t just go to cash machine and withdraw cash?

Get advice from your accountant. Getting this wrong could mean giving money away to HMRC.

That will keep tax down for the rest of us, but I'm sure you don't want to do that!

 

[elaine@cheapaccounting]

Your lender will want info from your accountant

 

[robindunne]

2. HMRC require your combined wages/dividends to be a realistic value of the work you do for the company if the company can afford to pay it - i.e. you can't allow the company to make a million, not pay yourself any wages nor dividends, and still expect a large working tax credit award!

That's a funny one. Never understood how that can be enforced. If HMRC look at your accounts, how can they assert that any cash in reserves are to be paid to the shareholder as dividends? How can they prove the reserves aren't being held for any other purpose eg. to reinvest in the business.

I understand HMRCs argument, but there is no pratical way that can be enforced.

 

[akirk]

So, here comes my actual idea: I`m willing to buy property and take mortgage for my family(not business commercial). Mortgage lenders are asking for 2 years of trading history or wage payslips. 2 years of trading history won`t work as I formed this company just in April this year, but payslips option sounds good. As I own my company myself - I can pay myself salary and print payslips, therefore I will have paperwork to show lender.

Am I correct? Or payslips cannot be off my own company?

mmm - unlikely
they will want your company accounts / personal bank statements to see payment history / if you have above % ownership of your business you will find that they will deal with you quite differently...

Alasdair

 

[Tax Specialist]

Hi,

Also bear in mind you need to protect your retirement pension entitlement.
You need therefore to pay yourself a small salary up to the national insurance threshold to secure a year's deemed Nat Ins contributions.
Better still if you actually incur, say, £5 per month Nat Ins in that it will
be copied to your pension entitlement - easier that way. Then take some
professional advice as to how you are going to pay dividends. Getting it
wrong could be a bonanza for HMRC as they may seek to re-classify your dividends as salary and charge you a fortune in Nat Ins & PAYE !

Best wishes,

Tax Specialist

 

[elaine@cheapaccounting]

Getting it
wrong could be a bonanza for HMRC as they may seek to re-classify your dividends as salary and charge you a fortune in Nat Ins & PAYE !

Best wishes,

Tax Specialist

Can you please clarify what you mean here? In what circs would HMRC do this?

 

[Tax Specialist]

Hi,

There is evidence that HMRC are checking small limited companies
to make sure that the payments classed as 'dividends' are actually
paid as such ie that all the correct documentation for a proper dividend
is in place.

Best Wishes,

Graham Funnell

Tax Specialist

 

[elaine@cheapaccounting]

Hi,

There is evidence that HMRC are checking small limited companies
to make sure that the payments classed as 'dividends' are actually
paid as such ie that all the correct documentation for a proper dividend
is in place. Please give me a call on 01209 821983 for further advice, but you do need to be very careful with the supporting documentation.

Best Wishes,

Graham Funnell

Tax Specialist

Graham

WHAT EVIDENCE?????????????????

 

[Tax Specialist]

Hi,

Various articles in 'Taxation' magazine and 'Tax Journal' have referred to this as has an excellent little book from DTE Publishing, based in the Midlands. (You may be able to get a second-hand copy quite cheaply on-line)

Also suggest you go to a very good website resource, the url for which I am not allowed to post here, for more free advice, which is a bit unfortunate as it contains all the info you need, in one place. I will try spacing the address www ir35calc.co.uk which is not my own !

All you need should be in there and I expect your accountant may
be able to give you copies.

Best wishes,

Tax Specialist

 

[robindunne]

Hi,

Also bear in mind you need to protect your retirement pension entitlement.
You need therefore to pay yourself a small salary up to the national insurance threshold to secure a year's deemed Nat Ins contributions.
Better still if you actually incur, say, £5 per month Nat Ins in that it will
be copied to your pension entitlement - easier that way.

mmmm, not too sure about that. A salary of anything between £105 and £110 a week will ensure NI stamp, but no need to pay NI.

The only issue is registering PAYE to ensure your are credited the NI.

 

[Tax Specialist]

Hi,

Bear in mind that all Limited Company Accounts and Corporation Tax Returns
will need to be submitted to HMRC using iXBRL-compliant software as from
April 2011.

Best wishes,

Tax Specialist

 

[Tax Specialist]

Hi,

We have found that, unless a very small amount of Nat Insurance is
actually physically paid, HMRC do not pass the details on to DWP for
pension credit purposes. So P60's would have to be retained, perhaps
for many, many years, to support the claim, if no NI is paid. Up to you,
really.

 

[robindunne]

Hi,

We have found that, unless a very small amount of Nat Insurance is
actually physically paid, HMRC do not pass the details on to DWP for
pension credit purposes. So P60's would have to be retained, perhaps
for many, many years, to support the claim, if no NI is paid. Up to you,
really.

Do you make this stuff up? It really is unhelpful to the people reading these forums.

 

[MyAccountantOnline]

Hi,

We have found that, unless a very small amount of Nat Insurance is
actually physically paid, HMRC do not pass the details on to DWP for
pension credit purposes. So P60's would have to be retained, perhaps
for many, many years, to support the claim, if no NI is paid. Up to you,
really.

In over 25 years in practice I have never had this problem - anyone else???

I certainly wouldnt dream of getting my clients to pay any tax or NI which can be legitimately avoided.

 

[elaine@cheapaccounting]

This newbie must be a wind up.

I'm going to ignore now as the comments are misleading at best.

I would suggest that others double check any of the points given by this newbie with an expert.

Extract from my blog ....

http://www.cheapaccounting.co.uk/blog/?p=185

Who is an Expert?

Continuing on my theme of ‘Who is an Expert’ I thought I would write about those ‘faceless’ or ‘anon’ posters who

• thinks they know it all
• are happy to criticise anyone in sight
• give inaccurate and misleading information

Don’t you just love them!

I do struggle with the concept that someone is willing to take and act upon advice received from a faceless individual and use that to run, direct, change or manage their business.

Why?

What happens when it all goes wrong?

And with some of the advice I have seen given by these ‘faceless characters’ – it will do!

There are plenty of great resources out there providing free information, guides and advice from well respected industry specialists.

For example Start Up Donut and it’s associated brands Law Donut and Marketing Donut.

My advice for what it is worth – use them and make sure that you follow our top five tips for checking out your expert:

Check the name
Is the advice from a named source or just a general post on a web site or blog? Can it be attributed to a specialist in the knowledge area?

Credentials of the source
If from a named source, what are the credentials of the person giving the advice? How much experience do they have in business and the knowledge area?

When was the advice posted?
Laws, market conditions and the economy change frequently. So what was good advice a couple of years ago may not hold today. Check the age of the advice.

Is the advice supported?
Did the author back up the advice with e.g. references to source material, case studies or similar?

Would you use the advice and give it to others?
This is pretty much the acid test – does the advice make sense? Would you use it in your business? Would you pass it onto others?

 

[MyAccountantOnline]

Excellent post Elaine - thank you.

 

[elaine@cheapaccounting]

Credentials of the source
If from a named source, what are the credentials of the person giving the advice? How much experience do they have in business and the knowledge area?

Excellent post Elaine - thank you.

Thanks

Not sure I pass the credentials test - I only have a few posts and thanks here

 

[MyAccountantOnline]

Thanks

Not sure I pass the credentials test - I only have a few posts and thanks here

I think you'll just about pass the test

 

[Williams lester]

Hi,

We have found that, unless a very small amount of Nat Insurance is
actually physically paid, HMRC do not pass the details on to DWP for
pension credit purposes. So P60's would have to be retained, perhaps
for many, many years, to support the claim, if no NI is paid. Up to you,
really.

Are you HMRC is disguise? This is utter nonsense, my wife works for DWP, so I can assure you that this is 100% wrong.

 

[elaine@cheapaccounting]

Are you HMRC is disguise?

why on earth would someone pretend to be HMRC

Call for men in white coats immediately.

 

[Williams lester]

why on earth would someone pretend to be HMRC

Call for men in white coats immediately.

I was more thinking of it being someone from HMRC pretending to be a tax specialist!

 

[elaine@cheapaccounting]

I was more thinking of it being someone from HMRC pretending to be a tax specialist!

No sorry - you got me there.

Isn't that an oxymoron

 

[Philip Hoyle]

Sounds like someone who takes the CPD courses a little too seriously and takes on board all the "horror story" myths peddled by the "top" tax lecturers hoping to generate consultancy income from attendees. I clearly remember attending a Mercia course where the "tax expert" told all the delegates that they should encourage directors to pay a "proper" market rate and accept the higher taxes/NIC because "HMRC won't like it" if they did the low salary/high dividend route - the same expert then went on about not giving shares to wives as HMRC "wont like" dividends paid to a non-working spouse. Needless to say he was an ex HMRC inspector who seemingly hadn't quite made the transition from one side of the fence to another. Perhaps our new "expert" on here is likewise newly ex-HMRC?

 

[Davem1234]

The "tax specialist" is on a roll with interesting advice, either he is ahead of the game or just blagging it ... I know which I think!!

Dave

 

[billy buntin]

Get advice from your accountant. Getting this wrong could mean giving money away to HMRC.

That will keep tax down for the rest of us, but I'm sure you don't want to do that!

so what they are saying is, pay an accountant a rediculous amount of money for a service that you can get for free elsewhere, that way the government will still get money from the fuel and road tax that you have helped to fund for your accountants porche

 

[Davem1234]

If your accountant has a Porsche then he/she must have many happy clients who are happy with the level of service and fees he/she charges.

If an Accountant does a bad job or overcharges then the business wont succeed for ever.

I am an Accountant driving a 6 year old Renault Megane and I love it.

Along with many other Accountants on this website I aim to give a quality service for the right (but not an inflated) price.

If you want to do your own tax return then that's fine, give it a go but don't put a slur all Accountants just because you don't think we do a worthwhile and professional job.

Rant over!!

Dave

 

[MyAccountantOnline]

If your accountant has a Porsche then he/she must have many happy clients who are happy with the level of service and fees he/she charges.

Absolutely - I think Porsches were rather 1980's