How do I do this?

[dada2]

So I, the director, have earned £100 for my private limited company. I set my salary £20 under PAYE, claim £5 expenses and the secratary's salary is £5. I would like to leave £20 in my company account. I can't live on £20 income alone so I want to draw additional £50 (can be £5000). How do I do this - just draw it and let the accountant deal with settling the figures - loan, bonus, div - at the end of the financial year or is there any specific way?

Many thanks in advance.

[Darren@UptonAccountants]

Loans, divis

So I, the director, have earned £100 for my private limited company. I set my salary £20 under PAYE, claim £5 expenses and the secratary's salary is £5. I would like to leave £20 in my company account. I can't live on £20 income alone so I want to draw additional £50 (can be £5000). How do I do this - just draw it and let the accountant deal with settling the figures - loan, bonus, div - at the end of the financial year or is there any specific way?

Many thanks in advance.

Speak to your accountant, he should be able to advise you on salary/dividend split together with retaining a proportion after expenses for corporation tax.

[boredsenseless]

Well assuming you have an accountant I would suggest that you always inform them before drawing money as they can advise the most efficient way.

In terms of a dividend - you can only draw this if the money is actual profit and would be retained at the end of the year if you hadn't already paid it out. You need to remember to leave enough in your company account to pay the corporation tax on it as well.

Drawing dividends frequently is like a red rag to a bull for HMCR so try to do it only once or twice a year. Most people who've been doing this a while only take dividends from the profit from the year before therefore ensuring that the Corp Tax is already paid and that the powers that be can't dispute the fact it was indeed profit.

Loans are okay provided they are below £5000 (i think - again accountant will advise) but you need to pay them back within 9 months or all sorts of tax become payable.

Bonus is fine but will be taxed in the usual way so dividends may be more efficient. However if you are going to pay a bonus you may as well have paid yourself a higher wage to start with as you'll end up paying the same Tax and NI anyway.

[malvolio]

Just out of interest, you can take a director's loan (not more than £5k - I think but don't quote me on that - and repaid within 9 months or it becomes a BIK and treated as salary) and then repay it by declaring a dividend to the same amount but not actually taking the money. Had to do this a few years back when the previous accountants had rather screwed up the books and SJD were sorting out the mess.