What is the best way to pay yourself as a director of your own company?

[BlackC55]

I need to know the best way to pay myself and not to pay too much tax. I know very little about dividens.

Can anyone advise?

 

[IanA2]

I need to know the best way to pay myself and not to pay too much tax.....

Can anyone advise?

Hire an accountant....

(probably still divi's)

 

[ceejaySL]

Dividends rely on you being a shareholder of the company as well.

The tax rules are quite complex. Don't forget you can still be employee of the company even though you are director, and even if you are not, the IR may tax you as same.

A specialist tax accountant is a good start. But remember there are good ones and bad ones - and that you as the company principal are legally and finacially responsible even if they give you bad advice.

 

[Nibbo]

I have not run my own company for about 8 years now but when I did I used to pay myself a 'reasonable' salary (i.e. one that would cover my living costs) and the rest as dividends.
At that time dividends were taxed at the basic rate but the old inspectors could get 'funny' (not ha ha) if your salary is too low.
Not sure if this is still the same but best bet is to find a GOOD accountant.

 

[BlackC55]

Thanks guys.

 

[dougal74]

You should definitely take advice as it will save you more than it costs in prof. fees.
The critical thing is that HMR take a much more active role in looking at these arrangements to ensure that they are genuine structures and not merely a way of avoiding tax (for employees in all but name).
The options will also vary greatly depending upon company structure shareholdings, LLP etc.

 

[miro]

I need to know the best way to pay myself and not to pay too much tax. I know very little about dividens.

Can anyone advise?

I think the best thing is to pay yourself the least amount possible and find a legitimate way for more of your personal expenses to be handled by company accounts.

This may include travel, hotels, cars, fuel, phone, power and so on. The less you have to spend on yourself the lower your cost of living. The number of work related deductibles is quite large.

Then after all that you may consider what to pay yourself - but paying yourself is a nominal notion.

 

[99E320LPG]

I use a Management company and am very happy

I am an IT contractor and as such fall into the realms of IR35 rules. It is all very confusing but I use a management company who deal with all the difficult stuff for me. Take a look at http://www.paystream.co.uk I would definately recommend them. You can give them a call and they will do a personal quote for you, with obligation.

If you decide to go with them please request my details as I think they give a bonus for recommedations, but have never tried.

 

[R2e]

Small salary and dividends as a Limited company (This is the advice I was given by my accountant (An accountancy group, not a fly-by-night). If you do not have a contract for 'personal services' and only one client, IR35 does not apply (I speak from personal experience of an IR35 investigation lasting two years). Buy yourself a copy of Quickbooks to do your accounts and payroll. Cheaper than paying a management company, why give away your hard earned.............

 

[99E320LPG]

Re:

Cheaper than paying a management company, why give away your hard earned.............

Your quite right I simply choose to pay a small fee to have some one else take away the burden of VAT returns, PAYE, National Insurance and compliance with IR 35. Thereby leaving me more time to earn the stuff>>>

 

[Geezer]

What is the best way to pay yourself as a director of your own company?

Cash in hand of course!!

 

[axesrus]

Get a reciept for everything. and buy/direct debit as much as possible from your bizz acc as biz expenses.
I was told, once you take anything from your biz account via transfer etc..its taxable.if you cannot prove its a biz expense.(even if you put it back).

 

[marcos]

Get a reciept for everything. and buy/direct debit as much as possible from your bizz acc as biz expenses.
I was told, once you take anything from your biz account via transfer etc..its taxable.if you cannot prove its a biz expense.(even if you put it back).

And then when they inspect you you have to justify everything on those accounts is business related, if not you get a hefty fine.

 

[axesrus]

Thats right,thats where a good accountant comes in.
My main point was keeping/getting reciepts,and not moving cash from biz account,if it don't need moving.

 

[AbbieCadabra]

another vote for small salary bumped up with dividends & a Ltd company

 

[BlackC55]

another vote for small salary bumped up with dividends & a Ltd company

Who is that in your Avatar?

 

[Nibbo]

Who is that in your Avatar?

Stay focused!

 

[lil.smartie]

Salary = to your annual tax allowance (so no Tax/NI but keeps you upto date for state pension etc..) and then dividends for the rest!

That's how we have been told to do our by our accountant!

Kate

 

[C43AMG]

Olly i have a Ltd Co. The way it works is that you pay yourself a salary as low as possible there is a minimum and pay NI and tax on that as NI and tax are taken by a %, then you pay corporation tax on your profits and you then you are paid dividends.
As has been suggested get an accountant and depending on your circumstances it may not be suitable for you to form a Ltd Co. It may be better to be Sole Proprietor, he will advise you. Good luck

 

[comports]

Well I do both (MD and shareholder of my Ltd Co and self employed contractor)

As a contractor I proved I have more than one customer and so not subject to IR35.

As a Ltd Co I pay myself a small salary to keep under the 40% bracket and Mrs Comports as another director/shareholder). Then the rest I pay out as dividends and as has been mentioned before, I put as much through the books as business expenses as I can thus limiting the tax liability. They do have to be legitimate business expenses though.

I work from home but if I started to claim tax relief on say 1/4 of the mortgage for using my home as my office then if/when I sell the house I would have to pay corporation tax on 1/4 of the profit from the sale of the house, so be careful what personal things you put through the business. Phone/internet and a percentage of general bills are fine though.

I also have a very good accountant who charges me £40 per month to do it all. VAT, Tax returns, annual reports and accounts etc..

Running my business, that's the best £40 investment I could make. It saves me hours and hours of time and gets the best results for the expense.

Remember, however Tax avoidance is great , tax evasion is a illegal and could cost you dearly in the long run..

Hope this helps but my strong advice would be "Get a good accountant".