Reply to: Urgent: I paid myself too much salary !

[Craig@Clarity]

A good example of what accountants keep on top of in the background that many people don't see when complaining about cost. That gem could save people some good money.

Now get Clare a nice cup of tea..

Shame there is not dislike button on here!!! You'll have to do with a like instead. Now get the round in!

[Clare@InTouch]

Claire

Where's the dislike button?

[DirtyDog]

Now get Clare a nice cup of tea..

Claire

[DirtyDog]

Just an FYI and heads up etc etc. The rate drops to 3.25% from April. HM Revenue & Customs: Beneficial loan arrangements - official rates

And the threshold goes up to £10k

[northernladuk]

Just an FYI and heads up etc etc. The rate drops to 3.25% from April. HM Revenue & Customs: Beneficial loan arrangements - official rates

A good example of what accountants keep on top of in the background that many people don't see when complaining about cost. That gem could save people some good money.

Now get Clare a nice cup of tea..

[Craig@Clarity]

If the loan is over £5k then you should pay interest on it (4%)

Just an FYI and heads up etc etc. The rate drops to 3.25% from April. HM Revenue & Customs: Beneficial loan arrangements - official rates

[Wanderer]

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 don't see what the problem is, if it wasn't declared on RTI then it's a director's loan so just put it down as that.

If you pay off your director's loan in full by the last day of your company's Corporation Tax accounting period then you don't need to tell HMRC about the loan on your Company Tax Return so no problem... If the loan is over £5k then you should pay interest on it (4%) to avoid the BIK but remember that the interest is paid back to you minus Corp Tax so the interest rate is effectively about 1%.

[ASB]

So, basically you paid yourself 1000 month net. There was nothing submitted to hmrc??

If thos is what happened I would rather imagine it was actually a salary of 9000 odd. The difference being loans which would have been journalised to the directors accoutn. Then cleared either by repayment or subsequent dividend.

At leasr thats what it looks what it might hsve been. Based on what you describe I dont see why your accountants seem so certain it was all salary.

[radish2008]

I'm a bit confused. Why are you having to pay £2300 tax on a salary of £12k? Surely you're taxed ON £2300?

"If the salary for 13/14 is £12K net then this will be a gross salary of £13,499. The company’s PAYE/NI bill to pay in April 2014 will be £2,300 comprising £810 tax and £1,490 total national insurance (employee’s + employer’s NI)."

[radish2008]

I don't see what the fuss is. You have two options from your accountant. Sit down and ask him to explain them or at least which is cheaper for you. Forget the threat of investigation. It's more possible you well get run over by a bus crossing the road to go see him. You don't have anything else going wrong you are trying to cover up? So what's the worry.

You pay him to service your accounts as directed by you so understand your two options and then just advise him to make it right. If he has clearly explained his next actions and you want a second opinion then post here. Better that than let a bunch of strangers try and put your accountant right.

Nothing to get your knickers in a twist really. It's all taxed on the way out at some point so a bit extra in this instance isn't the end of the world.

You ******* moron

Cheers NLUK. :-)

[d000hg]

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.

I'm a bit confused. Why are you having to pay £2300 tax on a salary of £12k? Surely you're taxed ON £2300?

[northernladuk]

And here I am. So 11k as directors loans and a possible investigation (as advised by my accountant) OR 12k as net salary and £2,300 tax the pay next month.

I don't see what the fuss is. You have two options from your accountant. Sit down and ask him to explain them or at least which is cheaper for you. Forget the threat of investigation. It's more possible you well get run over by a bus crossing the road to go see him. You don't have anything else going wrong you are trying to cover up? So what's the worry.

You pay him to service your accounts as directed by you so understand your two options and then just advise him to make it right. If he has clearly explained his next actions and you want a second opinion then post here. Better that than let a bunch of strangers try and put your accountant right.

Nothing to get your knickers in a twist really. It's all taxed on the way out at some point so a bit extra in this instance isn't the end of the world.

You ******* moron

[TheCyclingProgrammer]

It's the former. But you only need declare it if you don't pay interest on it.

I suppose the interest could be calculated to-date and re-credited to the DLA (thus increasing what is owed); but would crediting it to the DLA compound the interest? If not then this is probably much easier than faffing around with NICs.

[DirtyDog]

Your second priority is to resolve the issue of the BIK on the loan. Check with your accountant to see if NI is chargeable on the whole loan or just the amount over £5k (I think it might be the former). You will need to declare this on your P11D and pay Class 1A NI contributions.

It's the former. But you only need declare it if you don't pay interest on it.

[TheCyclingProgrammer]

And here I am. So 11k as directors loans and a possible investigation (as advised by my accountant) OR 12k as net salary and £2,300 tax the pay next month.

I don't think you get to choose how to treat your payments to date. IANAA so you will need to ask yours or wait for an accountant on here to confirm, but I'm pretty sure that in the absence of any payroll or dividend paperwork, your payments to date are a directors loan.

If you make the PAYE submission as advised by your accountant, then you can offset the salary declared against your loan and pay off the balance by declaring a dividend (assuming you have enough retained profit to do this). Clearing the loan correctly should be your first priority.

Your second priority is to resolve the issue of the BIK on the loan. Check with your accountant to see if NI is chargeable on the whole loan or just the amount over £5k (I think it might be the former). You will need to declare this on your P11D and pay Class 1A NI contributions.

You're unlikely to get investigated if you do this correctly. This is what you pay your accountant for.