How to pay yourself a salary?

[ndl]

Hello good people,

I've been contracting for a couple months, saved some money in the company's bank account, got a PAYE activation code for Employers from HRMC. Now the time has come up to pay myself a salary.

The accountant says that they will tell me how much I should transfer from the company's bank account to my personal account. And when the times comes, they will tell me how much taxes I need to pay to HMRC. Well, that doesn't sound right to me. I thought that one has to use some kind of PAYE application (like this one from HMRC web site - https://www.gov.uk/basic-paye-tools) which will calculate and send all information regarding the taxes to HMRC automatically.

The other thing is how the "PAYE Activation for Employers" comes into all this? My accountant said that it is not necessary for paying yourself a salary.

Could someone please clarify what is the process of paying yourself a salary? If there are a couple of ways to do it, what is the proper way?

Thank you!

[northernladuk]

Well first off you might as well sack your accountant seems you won't listen to them.

Is there any chance at all you thought wrong maybe? Does that tool tell you most tax efficient salary to take?

If you realise later you do need an accountant make sure it is a Freeagent one. The tool is very clear and also lets you submit your RTI from it etc.

[Lance]

The accountant says that they will tell me how much I should transfer from the company's bank account to my personal account. And when the times comes, they will tell me how much taxes I need to pay to HMRC. Well, that doesn't sound right to me. I thought that one has to use some kind of PAYE application (like this one from HMRC web site - https://www.gov.uk/basic-paye-tools) which will calculate and send all information regarding the taxes to HMRC automatically.

Why not?

Your accountant will do the filing for you. You can use that tool if you wish and the accountant will be pleased as it's less work for him. No discount though, and if you balls it up it's your problem.

I suggest you stop 'thinking' about other professions that you don't understand yet, and start thinking about your own. After a few years you may choose to do all this yourself but IMO it's a false economy.

[missinggreenfields]

Could someone please clarify what is the process of paying yourself a salary? If there are a couple of ways to do it, what is the proper way?

Whoever operates your payroll will need to ensure that the correct information is returned to HMRC at the right time - I set the salary level I want to take each year, and then my accountant operates the payroll for me. If you want to do your own payroll then you should do that instead - there is no "proper" way to do it, but you don't want to get it wrong.