Urgent: I paid myself too much salary !

[radish2008]

Ok,

So I've done something really stupid. I received an email from my accountant advising me to pay myself £9350 in one lump sum in March this year. For some crazy reason I got this confused with another email and have been paying myself £1k a month giving me a net salary 2013/14 of £12k and a potential tax bill of £2,300 due next month.

My accountant has advised me that the easiest route is to pay the tax.

They have advised me that is I go back to the £9350 I will need to pay the difference back to the business and also file income tax payments for the last year + penalties and interest for late payment. They have heavily hinted that this is likely to cause HMRC to investigate.

Obviously I don't want to appear on their radar if at all possible and fully accept I've been a bit dim but I don't want to pay out £2.3k if I really don't need to.

[Clare@InTouch]

The £2,300 should be PAYE that your company would pay, rather than a payment you need to make personally. It does seem the simplest option.

The alternative, as your accountant says, is to treat the £1,000 payments to yourself as loans, but that has tax implications of it's own.

[Craig@Clarity]

Alternatively, you could treat the overpaid amounts as either a loan (which you pay back), dividends or reimbursement of expenses incurred on behalf of your company (if you haven't already reimbursed yourself).

[radish2008]

The £2,300 should be PAYE that your company would pay, rather than a payment you need to make personally. It does seem the simplest option.

The alternative, as your accountant says, is to treat the £1,000 payments to yourself as loans, but that has tax implications of it's own.

Yes - the company would pay the £2.3k.

So, a costly mistake then ?

[DirtyDog]

Treat the excess over £9350 as directors loans. Since that's not going to be over £5k, there is no interest to pay, but you need to repay the money to the company. If you can't repay it, then declare a dividend to clear the loan balance, and don't actually take the money.

The simplest way out of this is for the company to make the right PAYE payment, though.

[radish2008]

Alternatively, you could treat the overpaid amounts as either a loan (which you pay back), dividends or reimbursement of expenses incurred on behalf of your company (if you haven't already reimbursed yourself).

I think that because of the fact I should have been notifying HMRC of salary payments through RTI (no RTI submission have been made) then I would have to make backdated submissions and that is where the complications would be.

[radish2008]

The simplest way out of this is for the company to make the right PAYE payment, though.

I know. I feel like a total idiot. I can sort the money either way, what I'm worried about is the potential for an investigation.

[TheCyclingProgrammer]

I'm confused by OP. They've paid themselves £1k/month presumably as salary. I'm also assuming that dividends have been taken which has pushed OP into the higher tax band.

Regardless of dividends, shouldn't the £1k/month salary been going through the payroll system? Shouldn't the payroll system have automatically been calculating the relevant PAYE and NI payments each month anyway?

I can't see how OP could be in a position to owe tax on their salary as it should have been taxed at source. If they've been pushed into the higher tax band then the excess tax would be due on the dividends over the threshold wouldn't it? And that tax wouldn't be due until Jan 2015 anyway.

[TheCyclingProgrammer]

I think that because of the fact I should have been notifying HMRC of salary payments through RTI (no RTI submission have been made) then I would have to make backdated submissions and that is where the complications would be.

I'm sure somebody will correct me if I'm wrong, but if you've been drawing £1k from the company each month without either a) treating them as salary and putting them through the payroll or b) treating them as dividends and drawing up the appropriate dividend paperwork, then surely the only way these £1k payments can be legitimately treated is as directors loans, in which case you have further complications as anything in excess of £5k would be treated as a BIK.

I'm not sure if backdated submissions are even possible. My understanding of RTI was that submissions had to be made before the money was paid.

It sounds like you're in a whole heap of mess and you should be getting your accountant to sort this out for you (and paying him extra if you have to).

[TheCyclingProgrammer]

I know. I feel like a total idiot. I can sort the money either way, what I'm worried about is the potential for an investigation.

You should feel like an idiot. You've been totally incompetent with your company finances, from the sounds of things.