Ltd Co - Minimum Salary
Discussion
Percy Cushion said:
Hi folks,
I'm looking to set up a Limited Company and I have a simple question regarding the Director/Employee salary: Can the Director pay himself £12,750 per year or is he legally obligated to pay himself the minimum wage, i.e. £12.21 per hour (2025)?
Thanks.
They can pay themselves as little as they want (depending on how much tax, Ers NI, Ees NI they want to avoid).I'm looking to set up a Limited Company and I have a simple question regarding the Director/Employee salary: Can the Director pay himself £12,750 per year or is he legally obligated to pay himself the minimum wage, i.e. £12.21 per hour (2025)?
Thanks.
The only issue is if he decided to claim universal credit. DWP assume you are earning at least the minimum wage.
greengreenwood7 said:
check with your accountant but i think you'll want to pay yourself around 8.5k to avoid NI contributions....
That used to be the case, but the recent Budget has changed things. If there is only one director, and you want to fully avoid NI contributions, you need to pay yourself £5k. If there is more than one director / more than one person on the payroll you are then eligible to claim relief on the National insurance contributions. Some info here https://www.fsb.org.uk/resources-page/what-is-the-...jonathan_roberts said:
I don’t see the point in running a company if you have such low financial ambition levels. Obviously make it as tax efficient as possible but Jesus, at that level your concerns should be elsewhere.
You do know that the salary isn’t the only income from the Limited Company, right?Percy Cushion said:
jonathan_roberts said:
I don’t see the point in running a company if you have such low financial ambition levels. Obviously make it as tax efficient as possible but Jesus, at that level your concerns should be elsewhere.
You do know that the salary isn’t the only income from the Limited Company, right?You know then that he could take a tiny salary, pay dividends to multiple shareholders and make large pension contributions?
Not to mention if his actual cash needs are low but turnover high he can just leave the money in the company to either grow the company, invest it or sit to be taken at a later date (and only have to pay income tax when he does take it).
I pay myself well under 20% of company turnover. We just don’t need much cash to live.
Not to mention if his actual cash needs are low but turnover high he can just leave the money in the company to either grow the company, invest it or sit to be taken at a later date (and only have to pay income tax when he does take it).
I pay myself well under 20% of company turnover. We just don’t need much cash to live.
My point was ineloquently put. Focus on making money first. Then once you’ve made some money, get the accountant to do the maths on paying yourself in the most efficient way. It’s just not worth bothering about if you’re serious about making money. If it’s a project that only ever makes £5k a year, I’d question the need for a ltd co.
Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
jonathan_roberts said:
My point was ineloquently put. Focus on making money first. Then once you’ve made some money, get the accountant to do the maths on paying yourself in the most efficient way. It’s just not worth bothering about if you’re serious about making money. If it’s a project that only ever makes £5k a year, I’d question the need for a ltd co.
Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
Wow, I wish I was rich like you. Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
jonathan_roberts said:
My point was ineloquently put. Focus on making money first. Then once you’ve made some money, get the accountant to do the maths on paying yourself in the most efficient way. It’s just not worth bothering about if you’re serious about making money. If it’s a project that only ever makes £5k a year, I’d question the need for a ltd co.
Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
Apologies, but you're just second guessing about the OP's situation. And once you've got some money, it may be too late to get the accountant to work out the most efficient route. The golden rule is to speak to your accountant before not after.Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
MaxFromage said:
jonathan_roberts said:
My point was ineloquently put. Focus on making money first. Then once you’ve made some money, get the accountant to do the maths on paying yourself in the most efficient way. It’s just not worth bothering about if you’re serious about making money. If it’s a project that only ever makes £5k a year, I’d question the need for a ltd co.
Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
Apologies, but you're just second guessing about the OP's situation. And once you've got some money, it may be too late to get the accountant to work out the most efficient route. The golden rule is to speak to your accountant before not after.Paying tax is a fact of life and paying more tax is a sign you’re doing something right. It’s a fact of life so whilst it’s worth minimising exposure to it, it’s just another thing you have to factor in when running a business.
If it’s all organised within the first year then everything is doable. Just focus on making it profitable, then sit with your accountant before the end of the year and sort it all out.
Agree on doing a modicum with the accountant beforehand.
Lefty said:
You know then that he could take a tiny salary, pay dividends to multiple shareholders and make large pension contributions?
Not to mention if his actual cash needs are low but turnover high he can just leave the money in the company to either grow the company, invest it or sit to be taken at a later date (and only have to pay income tax when he does take it).
I pay myself well under 20% of company turnover. We just don’t need much cash to live.
What is the income tax if you take it at a later date? Is it just the normal tax tiers? What happens if you fold the company with a large cash reserve?Not to mention if his actual cash needs are low but turnover high he can just leave the money in the company to either grow the company, invest it or sit to be taken at a later date (and only have to pay income tax when he does take it).
I pay myself well under 20% of company turnover. We just don’t need much cash to live.
I know a few consultants who work out of their own limited company and could potentially be looking to do similar in the future. I understand the basic tax efficient way of paying yourself little amounts and taking the rest in dividends. (effectively paying yourself circa £50k a year to be most tax efficient)
Knowing certain fields and the likely day rates, this would leave a sizeable enough in the Ltd Company every year. Even with £40k put into pensions there could still be a good sum of money in the Ltd company.
I'd imagine if you're between consultancy gigs, you can still draw a salary from the Ltd company?
If you leave a chunk of money in the company then yes you can claim entrepreneurs relief and get the lot out at a reduced rate. I think it’s 25% but I may be wrong.
The benefit of leaving cash in is also that if you are ever not working (or retired) you can continue to pay yourself at a lower tax rate.
The company can invest its spare money of course in any way you choose. You’ll pay corp tax on any profits.
The benefit of leaving cash in is also that if you are ever not working (or retired) you can continue to pay yourself at a lower tax rate.
The company can invest its spare money of course in any way you choose. You’ll pay corp tax on any profits.
Lefty said:
If you leave a chunk of money in the company then yes you can claim entrepreneurs relief and get the lot out at a reduced rate. I think it’s 25% but I may be wrong.
The benefit of leaving cash in is also that if you are ever not working (or retired) you can continue to pay yourself at a lower tax rate.
The company can invest its spare money of course in any way you choose. You’ll pay corp tax on any profits.
Sounds good. I've always been an employee and I do have great benefits which I get along with that. In the future I may be tempted to go down the consultancy route. I'm consistently weighting up the pro's and con's of both. I can easily live off the minimum salary and maximum dividends with least amount of liabilities. The bit I've always been confused about is how to maximise the "leftover" money you have in the company. I don't think it's a long term goal for me, but if I can get 5-10 years of consultancy work and build up a pot then fold the company for 25% it seems like a good trade off to me.The benefit of leaving cash in is also that if you are ever not working (or retired) you can continue to pay yourself at a lower tax rate.
The company can invest its spare money of course in any way you choose. You’ll pay corp tax on any profits.
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