Directors Tax and NI

[jaro]

Hi
Have Ltd Company and now setting up Myself (Director) and wife (Secretary) on PAYE.
can some one help me with
a. How much should we be paid to avoid Tax and Ni and does frequency matter
b. What is the best way to take any other money out of the business. We originally paid a lot out setting up the business and I presume that we can take that out by drawings, but if we do make any profit then how is the best way to pay as little tax as possible.

Would be grateful for a bit of advice, thanks.

[RAL]

a. How much should we be paid to avoid Tax and Ni and does frequency matter

You can pay £110 a week to avoid paying any ni and tax. However, you need to set up the paye scheme and file year end return to HMRC. If you pay £95.00 then you do not need to have a paye scheme as long as you are not obliged to make deductions.

For directors you can use one of two ways, 1. Use cumulative basis or weekly/monthly basis.

For secretary you have to use weekly/monthly basis. So for example if you process payroll weekly then you can pay upto the amount I mentioned above. However the amount exceeds thrshold then you have to deduct the ni and possbile tax.

b. What is the best way to take any other money out of the business. We originally paid a lot out setting up the business and I presume that we can take that out by drawings, but if we do make any profit then how is the best way to pay as little tax as possible.

The amout you paid out can be withdrawn without affecting any taxes. Speak to an accountant for the best way to extract the profit from your limited company.

Is your wife also share holder?

[jaro]

Thanks for getting back so quickly.

PAYE already set up

Yes both of us shareholders. I have allready earnt 7596.09 in previous employment on a week 1 basis this year so should I bother putting myself on the payroll.

[RAL]

Thanks for getting back so quickly.

PAYE already set up

Yes both of us shareholders. I have allready earnt 7596.09 in previous employment on a week 1 basis this year so should I bother putting myself on the payroll.

If you pay yourself in current tax year, you have to deduct tax at basic rate of 20%. But you get relief at 21% for the corporation tax. So best to speak to your accountant if you have not got one, engage one. If you need one contact me. As you can see everything needs to take into account.

[jaro]

Thanks for your help, much appreciated.

[chrismac1]

Because of your previous employment, take no salary this tax year because you'd just be paying across NI you don't need to pay and getting no benefit. Take the profits out as dividend with no NI.

Next year is different. Take £110 per week as salary which means you don't pay any NI - but put this through monthly payroll and submit end of year returns to HMRC, thus ensuring you get a full year-'s NI credit towards state benefits.

Take the rest as dividends.

key assumption made - that your circumstances are reasonably normal - in particular you don't want to pay a load of pension contribution as this would be restricted to your salary level unless you set up a company scheme.

[robbob]

Hello chrismac1

Because of your previous employment, take no salary this tax year because you'd just be paying across NI you don't need to pay and getting no benefit

Any previous employments will not have any impact on NI for the directorship so this statement seems a little misleading to me.
I agree with RAL's posts - nothing wrong with taking salary up to the limit where NI would be charged.

[RAL]

Hello Robbob

I have not seen you around for long time

[Mulbury Hamilton]

a. How much should we be paid to avoid Tax and Ni and does frequency matter

You can pay £110 a week to avoid paying any ni and tax. However, you need to set up the paye scheme and file year end return to HMRC. If you pay £95.00 then you do not need to have a paye scheme as long as you are not obliged to make deductions.

For directors you can use one of two ways, 1. Use cumulative basis or weekly/monthly basis.

For secretary you have to use weekly/monthly basis. So for example if you process payroll weekly then you can pay upto the amount I mentioned above. However the amount exceeds thrshold then you have to deduct the ni and possbile tax.

b. What is the best way to take any other money out of the business. We originally paid a lot out setting up the business and I presume that we can take that out by drawings, but if we do make any profit then how is the best way to pay as little tax as possible.

Hello my name is Emma and I work alongside Bespoke Tax Planners..
We would like to mention another option that would be available to you : If you the Director and Secretary paid yourselves a small salary of circa £6000 .
If you were to set up a Bespoke Off Shore Trust.this would allow you remunerate yourselves by paying yourselves through the trust over and above what you require to live comforatbley . The Proceeds are usually drawn out in a Tax Efficent way .

The amout you paid out can be withdrawn without affecting any taxes. Speak to an accountant for the best way to extract the profit from your limited company.

Is your wife also share holder?