• How Do Company Directors Get Paid? Oct 14, 2020 at 7:25 PM
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    Along with a passion for their business, a compelling reason that acts as a driving force for most business owners is profit and monetary gain. Once you complete your limited company formation, and are the acting director, you may be wondering “how do company directors get paid?”

    Remember, since limited companies are individual legal entities, all company finances and assets belong to the company itself and not to the business owners. Therefore, it’s vital to adhere to set procedures when taking money out of a limited company.

    In order to ensure you receive your salary in a timely and ethical manner, we’ll look at just how do company directors get paid a salary and how else money is taken out of a limited company.


    Take Out a Director’s Salary

    Since company directors are technically employees of a limited company, they too are able to receive a salary. Therefore, the company has to register with HMRC for PAYE and must pay Employer’s National Insurance Contributions (NIC). HMRC must receive the Income Tax deductions from the director’s salary on a monthly or quarterly basis.

    Salaries and wages are tax-deductible expenses that are paid prior to the deduction of Corporation Tax, meaning companies do not pay any tax on this money. For “tax-efficiency”, directors may pay themselves by taking a small salary up to the NIC primary threshold (£9,516 for 2020/21) but below the tax-free Personal Allowance limit (£12,500 for 2020/21); then via dividends, they can top up their personal income.

    It’s worth noting that directors who take money out of a limited company, and therefore precisely answer the question, “How do company directors get paid?” enjoy the benefit of incurring zero personal tax liability (on their salary), yet still qualify for state pension and benefit entitlement. Furthermore, the dividend tax that has to be paid on dividends is set at much lower rates than Income Tax.

    It’s worth noting that Income Tax rates for 2020/21 are:

    Read the full article for FREE at: https://www.yourcompanyformations.co.uk/blog/how-do-company-directors-get-paid/

    Self Assessment Note for Directors

    The question of “How do company directors get paid?” is unanswerable without the realisation that directors have to register Self-Assessment, therefore, all sources of taxable income must be annually returned.

    Note: If a director owes more tax than the company has collected through payroll (e.g. from dividend payments and benefits received), then the director has to pay the additional tax through Self Assessment.

    Read the full article for FREE at: https://www.yourcompanyformations.co.uk/blog/how-do-company-directors-get-paid/


    How Else Can Money Be Taken Out of a Limited Company?
    Dividend Payments
    Directors’ Loans
    Director’s Loans Taxes


    Read the full article for FREE at: https://www.yourcompanyformations.co.uk/blog/how-do-company-directors-get-paid/



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