Incompetency

[TheRefactornator]

Someone is incompetent in this scenario. It could be me or the accountant, I'm not sure but I thought I'd run it by the forum.

I run as ltd co. Due to genuine mistake my accountant for the last 12 months planned my director salary as £2.3k gross p/m and I paid personal tax/NI on that amount. It was always my intention to pay myself £2.3k net so that's what I took from the company each month.

It now gets to year end and the accountant now tells me that he assumed I was overpaying myself in order to offset the overpayment at year end as a dividend.

When I explained that was not really my intention and I didn't even know it was possible to overpay myself with a view to offset at year end as a dividend, we then agreed there had been a genuine mistake about the remuneration figure and the accountant calculates me a tax/ni bill for the balance of the overpaid salary of £4630.

Now it leaves me thinking should I actually declare the overpayment as a dividend or just pay the bill?

Like everyone else here I want to run my ltd co in the most tax efficient way possible, bit I think the problem here is that I'm constantly asking my accountant questions trying to glean the right information to make the right decisions, but the answers I get are always on the hector safe cautious side.

I reckon an accountant should be somone who is on my side who will give me the right info to make the right decisions without me having to second guess or read into the answer I get. Then I can get on with refactoring code which is what my current gig has me doing day in day out without having to worry about how much I'm overpaying the revenue or how bad my accountant is...

What do you think? Is it me or the accountant at fault here...or both?

[Sockpuppet]

Pay the bill.

If you didn't declare the dividend at a board meeting you can't do that later.

[TheRefactornator]

I'll pay the bill if I have to, but it doesn't answer the question where the fault lies; with the accountant or me.

If general consensus is that the accountant should be keeping me better informed, there's a case for sacking them (which I'm considering anyway).

[malvolio]

"Calculated my salary as..."? Does not compute; how do you "calculate" a gross salary?

"Most tax efficient"? Does not compute - that's closer to £5250 pa gross.

I think you're saying you want £2.3k net income made up of salary and dividends. That's not a good idea, but never mind, if that's what you told the accountant to work with, that's what he should have done. He assumed you meant gross and gone from there.

Accountants should always do what you tell them but will always err on the side of caution since they get sued if they screw up. At the end of the day, it's your company so you set the parameters - so you need to learn the basics of how it all works in rather more detail and instruct your accountant accordingly. And if he is not giving clear and unambiguous adivce, get another who who does.

The safest answer is to take an extra dividend, always assuming there is money in the compnay's profits to pay for it. If there isn't (in which case, why not?), you'll have to take it as salary and pay the PAYE/NICs, but that can be offset for a while via a Director's loan account. Whever, you need to make sure you're all working to the same hymn sheet next year.

As to who's at fault here - well, whose company is it?

[TheRefactornator]

"
"Most tax efficient"? Does not compute - that's closer to £5250 pa gross.

I think you're saying you want £2.3k net income made up of salary and dividends... That's not a good idea, but never mind

As I said that's £2.3k p/m not pa.

[BrilloPad]

Accountants should always do what you tell them but will always err on the side of caution since they get sued if they screw up.

I look upon them as being agents of HMRC.

[ruth11]

""Most tax efficient"? Does not compute - that's closer to £5250 pa gross.

I think you're saying you want £2.3k net income made up of salary and dividends.

for the last 12 months planned my director salary as £2.3k gross p/m and I paid personal tax/NI on that amount. It was always my intention to pay myself £2.3k net .........

....I want to run my ltd co in the most tax efficient way possible

If you were always planning on paying yourself £2.3k per month net SALARY, then it doesn't matter, you would have paid the tax anyway if your accountant hadn't misunderstood you.

What Mal is saying is that the most tax efficient method of taking £2.3k per month home, is to pay small salary (£5250 per year), pay no tax on it, then pay divis to up it to £2.3k per month and still pay no tax (that amount wouldn't take you over the threshold).

If you wanted to run your company in the most tax efficient way, you wouldn't be choosing a SALARY of £2.3k net.

[malvolio]

Precisely what I actually meant to say but did not express very clearly!

[chris79]

Best thing to do is educate yourself on the amounts involved in both PAYE/dividends, the tax bands involved, then just work out yourself what you want to pay and instruct your accountant the amount YOU want to be paid.

The maths involved isn't so difficult and if you want clarification just post your amounts on here and people can advise if you are doing the right/wrong thing.

[TheRefactornator]

That's the sort of good advice that I believe I should be getting from my accountant. Thanks very much.

It's time for a salary / dividend split rejig and an accountant sacking.