How does PAYE work for Ltd contractors' companies

[dude69]

I have registered a company, set up mid january, and am also now PAYE registered. First income was from the middle of January to date.

Was employed between 2004 and January 2006.

I am paying myself £8k, plus paying my wife £4800.

What do I need to do in terms of paying the IR?

Should I send in my P45 and my wife's to the Inland Revenue?

How often do I need to pay the Inland Revenue? Do we both count as 'employed', because we are getting a salary?

[ASB]

Did you read read the introduction the IR (should have) sent you? I think it's called "how to operate PAYE" or something equally challenging.

Assumiing you didn't get it then you should find all you need on the IR website. They also run free seminars.

[Mustang]

Paye 101

I will leave the "serious" comments and rolling of eyes to Malvolio!!

You and your wife are not self employed in HMRC terms you are employees of YourCo.

Each month (assuming you are not paying yourself weekly!) you will do a "payroll run" for you and your wife where you specify the salary you will draw that month and calculate the tax and NIC payments. Assuming you are a director you can pay yourself what you want per month but if you wife is not a director she will have to have a regular salary. (NOTE: seek advise on this since she will probably need a contract of employment too.....???)

Once you have calculated all your contributions and updated the approriate records. You right one cheque for you, one for your wife and one for HMRC for the total of ALL TAX & NIC payments. This has to be in with the revenue by typically the 19th of the month after you were paid.

Can't remember about P45 off the top of my head. I dont think you send it to the revenue but need the information on it to fill out other HMRC forms. I could go backlook at my notes but suggest 2 things: 1) call the HMRC help desk and 2) register for the FREE HMRC workshops. Each is a half day and covers things like: NIC for directors, PAYE, VAT, End of year returns. All info on HMRC website.

Few final comments: -

1) SEEK PROFESSIONL ADVICE FROM YOUR ACCOUNTANT AS I AM NOT QUALIFIED TO GIVE ADVICE

2) If you are unsure, get your accountant to run your PAYE for you for a few months so they set up all the paperwork that has to be done so you can take it over at some point!

Phew!! HTH. I am off to lie down now after "taxing" my brain!

[cojak]

"round of applause for mustang!"

[mcquiggd]

Whats the 'Inland Revenue'...?

[Mustang]

OK, OK. So I went into detail on a basic question. What can I say? I was in a good mood and wanted to help?

IMHO, always a fine line between helping someone and insisting they help themselves........

[ASB]

OK, OK. So I went into detail on a basic question. What can I say? I was in a good mood and wanted to help?

IMHO, always a fine line between helping someone and insisting they help themselves........

Yes, but the problem is the width of the original question.

A couple of points though - since a lot of it is not as absolute as you suggest (although your comments are entirely valid).

- You can pay with whatever pay frequency you want. This does impact the way NI is calculated for directors since that is on a cumulative basis, for non directors it is based on the payment in the pay period.

- Mrs, whether diector or not does not have to have a regular salary. Neither does she have to have a written contract of employment. [She just has an unwritten one in the absence of the former]

- Cash flow can be improved by making quarterly payments to the IR. This is allowed dependant upon the payroll size. It is also possible to make annual payments (but only if you use annual pay periods).

- You don't need a P45. If you don't have one use a P46 to request a coding. Also if it is not the only job of someone ensure this is made obvious to the taxman. Otherwise they will end up on the standard code and this is unhelpful because the allowances have been used elsewhere. Resullt = bill.

[martinb]

Hmrc

Everything you're likely to need is on the HMRC site here

http://www.hmrc.gov.uk/newemployers/index.shtml

[Mustang]

Agree with your point ASB. Thanks for filling in a few holes in my knowledge. Life is one long learning experience.......!!

[boredsenseless]

Yes, but the problem is the width of the original question.

A couple of points though - since a lot of it is not as absolute as you suggest (although your comments are entirely valid).

- You can pay with whatever pay frequency you want. This does impact the way NI is calculated for directors since that is on a cumulative basis, for non directors it is based on the payment in the pay period.

- Mrs, whether diector or not does not have to have a regular salary. Neither does she have to have a written contract of employment. [She just has an unwritten one in the absence of the former]

- Cash flow can be improved by making quarterly payments to the IR. This is allowed dependant upon the payroll size. It is also possible to make annual payments (but only if you use annual pay periods).

- You don't need a P45. If you don't have one use a P46 to request a coding. Also if it is not the only job of someone ensure this is made obvious to the taxman. Otherwise they will end up on the standard code and this is unhelpful because the allowances have been used elsewhere. Resullt = bill.

On the subject ot quarterly and yearly returns this is only possible if your sums of money you have to hand over are below certain thresholds. You'll need to read up to determine what they are.