Fuzzy On The Best Way To Pay Myself

[DanTheMan]

OK so my (newly discovered rubbish) accountant has advised that I pay myself purely via dividend. However, I've just been reading through the PCG guides and apparently this will subject me to many investigations and also mean that I don't have any NI benefits due to not earning a salary. Is that right?

If it is correct then would I be best of paying myself £5045 a year and the rest in monthly dividend? Or a flat standard monthy salary more like a perm would get along with quarterly dividend to avoid investigations?

And if I pay myself a salary then I gather I'll have to register PAYe (?)

Basically let's say my Ltd company will be receiving £4000 + VAT per month. What's the best method to break this down so that VAT, tax and a monthyl wage are taken care of?

And before anybody mentions it, yes I am looking for a new accountant!

Thanks for any and all help

[DaveB]

Fire your bloody accountant and get a decent one. Any good accounant will advice you on this and answer questions as well as sorting all the paperwork out for you. Thats what you pay them for.

SJD, 1st Accountancy and Nixon Williams all get positive opinions on here. Ring them up, talk to them. There's no obligation untill you decide to use one of them.

I use SJD and I know they would be more than happy to discuss your situation with you and offer a solution. I'm sure the other two would as well.

Seriously, if you're accountant is not explaining this to you and sorting the paper work on your behalf then you need to ditch them pronto. It's you HMRC will come after, not them, when they screw up.

[shippwreck]

Hi,

It has been explained to me thus:

You should also pay yourself upto the end of the 10% tax bracket. Why? Well that plus NI is roughly equal to the same amount you would pay on your dividends anyway so you wont actually loose anything. Also (and this is pure specualtion on the part of the advice giver as far as i'm aware) that way you are actually giving the Tax man something, all be it a small something and that way draw slightly less attention to yourself.

[Nixon Williams]

We would advise paying a slary of some sort, we usually advise around £10,000 although you can pay less than this if you wish.

There is no need to pay dividends quarterly, provided they are from profits there will not be a problem.

If you have any other questions I would be pleased to answer them on here or you can email me direct.

Alan

[DanTheMan]

Cool. I'm sending an email your way... I think.

[boredsenseless]

We would advise paying a slary of some sort, we usually advise around £10,000 although you can pay less than this if you wish.

There is no need to pay dividends quarterly, provided they are from profits there will not be a problem.

If you have any other questions I would be pleased to answer them on here or you can email me direct.

Alan

I agree and I'm not questioning your judgement you know it better than me, but how would you define 'profit'.

The way I define it is money that has already had Corporation tax on it, since if it has been invoiced in the current tax year there isn't actually any guarantee it will be profit until the end of the financial year.

What would you suggest?

[Nixon Williams]

Most of our clients have a steady cost base and so it is quite easy to work out the expected profit. We can calculate the dividends on a monthly basis as it is unlikely that there will be anything unexpected.

If you do have any large items planned such as a lump sum pension contribution etc you should take this into account or advise your accountant if they are calculating the dividend.

You can of course take account of retained profits from prior years, although most of our clients work on a month by month basis.

We would also take account of any capital items, whilst not fully reducing profit initially we take account of it as it does have a cash impact.

I hope this explains.


Alan

[boredsenseless]

Most of our clients have a steady cost base and so it is quite easy to work out the expected profit. We can calculate the dividends on a monthly basis as it is unlikely that there will be anything unexpected.

If you do have any large items planned such as a lump sum pension contribution etc you should take this into account or advise your accountant if they are calculating the dividend.

You can of course take account of retained profits from prior years, although most of our clients work on a month by month basis.

We would also take account of any capital items, whilst not fully reducing profit initially we take account of it as it does have a cash impact.

I hope this explains.


Alan

Thanks