Take all profits and repay as director's loan

[matt2012]

Hello

I am sorry to ask this if it has been asked before: I had a search both on Google and the forum but couldn't find an answer.

I am coming to the end of my first year of trading as an LTD and made profit less than the personal PAYE tax free threshold (so far I haven't paid myself a wage) and was hoping to take it all as a one-time salary payment just before the end of the accounting period. However, I want to keep some working capital in the business but it seems silly to pay any corporation tax when I have my whole tax free allowance left (a long story!). Therefore, am I legally allowed to pay myself the entire of the company's profits and then give the company a directors loan for ~£2k to run? I'm seeing an accountant soon but was hoping to get an idea first.

Thanks

[northernladuk]

It is possible to pay yourself a lump sum if you have accrued your wage but before you do anything else go speak to an accountant. The last thing you want to be doing is messing your accounts up so soon and making a target to Hmrc

We discussed paying wages in lump sums when the RTI kicked in. Have a look in the welcome forums for the sticky on how to search and look for RTI or something like that.

[Contreras]

Hello

I am sorry to ask this if it has been asked before: I had a search both on Google and the forum but couldn't find an answer.

I am coming to the end of my first year of trading as an LTD and made profit less than the personal PAYE tax free threshold (so far I haven't paid myself a wage) and was hoping to take it all as a one-time salary payment just before the end of the accounting period. However, I want to keep some working capital in the business but it seems silly to pay any corporation tax when I have my whole tax free allowance left (a long story!). Therefore, am I legally allowed to pay myself the entire of the company's profits and then give the company a directors loan for ~£2k to run? I'm seeing an accountant soon but was hoping to get an idea first.

Thanks

Yes you can do this, in principle you are loaning the co. capital to keep it afloat. In theory you could just declare the salary without drawing any cash and assign it to the DLA instead, and some accountants would advise this. My preference would be separate transfers to/from the co. account so it's bleedin obvious later on when the salary was taken.

As you seeing an accountant anyway get him/her to work out the numbers. Ideally you need at least £5668 for your NI stamp. Anything above £7696 will incur NI. The co. must be PAYE registered and the salary needs to be declared via RTI before you take it. Ideally leave enough profit in the co. to pay any known outstanding expenses: VAT, accountant's fee, etc. otherwise you will need to loan the co. enough capital to cover these.

[Craig at Nixon Williams]

It would be legally possible to do this – in view of what you have said it is what I would recommend doing. You haven’t stated exactly how much is in the company, but if it is more than £7,696 then you will incur employers NI.

I would speak to an accountant about this to ensure that you get it right.

Hope this helps!
Craig

[Wanderer]

Therefore, am I legally allowed to pay myself the entire of the company's profits and then give the company a directors loan for ~£2k to run?

Yes, sure but be certain you are actually taking a dividend out of company profits because there is a difference between a company's cash at hand and the amount of profit that is retained in the company.

Get yourself a decent book keeping system, SJD do a free spreadsheet you can download and use if you don't want to have an accountant on a monthly retainer but definitely talk to an accountant or you could end up paying a lot of tax you could have avoided.