How does a director pay themselves?
A director of a company has different options when it comes to pay. Each option has different tax benefits. It is very important to be clear on what method you will chose as your accountant will need to know this.
A dividend is rewarded to shareholders. An owner of a Limited Company is a shareholder and they will be able to pay themselves in the form of a dividend.
An advantage of a dividend is that you do not pay any national insurance on the payment. You will need to pay income which does depend on the level of your earnings.
A dividend will need to be paid to all shareholders of the company, this will need to be declared in the minutes of the meeting you will hold with the other directors.
Legally a dividend voucher must be created which would show some important information such as the date is was issued, the company details i.e name and number, the shareholders details and the amount the dividend is.
Pay As You Earn (real time). PAYE is a HMRC scheme to collect National insurance and income tax for employees of a company, including staff and directors. You will need to register for this scheme, if you`re the owner of a Limited Company you will be classes as an employer and employee.
When you pay yourself a monthly salary, you will need to send a PAYE return to HMRC which will show the amount you have paid, including tax and deductions. Again the amount of National Insurance and income tax will depend on the tax code and your tax status.
If you need help with your companies accounts please speak to us today. We offer free and impartial advice, our business accountant can help with PAYE registration and can help explain your current tax status and how best to optimise your current situation.