Ltd Co director / secretary salary

[unclegrouch]

just a quickie to get an idea, yes I will speak to my accountant but he's off for a couple of weeks & this one seems interesting.

A friend of mine has a small business / Ltd company. We were talking about salary / dividends etc & he told me that his accountant has advised him and his wife to take £165 per week each as a salary because this falls below the PAYE threshold & therefore almost no trouble / aggravation etc.

Does this ring true ? I assumed that ANY salary / wages paid would mean dealing with PAYE etc.

If it is somewhere near possible (even with different figures), it might well be worth me splitting my business & operating the main part under a Ltd company & my "sideline" as a sole trader.

All replies appreciated (especially from powerfully built, goatie wearing, company directors)

[Shaoxter]

I suspect your friend means you won't have to pay any income tax at that level, but you'd still have to be set up on the payroll and report real time PAYE.

p.s. the personal allowance is now £10k which is £192 a week before you start paying income tax (but would pay some NI at £10k).

[sumo69]

The NI threshold is somewhat lower at £7956 which makes £153 per week.

All salary payments must be reported via the RTI regime - no need to pay anymore than this unless there is an Employment Contract in place.

David

[unclegrouch]

Much appreciated peeps :-)

I think maybe he simplified it a bit, probably his accountant told him he would pay no income tax at those rates.

Thanks again for the advice :-)

[Du1point8]

unclegrouch said:

Much appreciated peeps :-)

I think maybe he simplified it a bit, probably his accountant told him he would pay no income tax at those rates.

Thanks again for the advice :-)

What he is saying is that he pays enough to get on the HMRC radar so that they know he is paying something and they look elsewhere.

if you just take dividends out, HMRC will be more likely to enquire as to why there is no salary.

[Fotic]

It sounds very much as though this would see you breaking Minimum Wage laws, a criminal offence. Tread carefully as they do consider your salary in this regard.

[UpTheIron]

Fotic said:

It sounds very much as though this would see you breaking Minimum Wage laws, a criminal offence. Tread carefully as they do consider your salary in this regard.

NMW doesn't apply to company director unless there is an employment contract in place.

[Eric Mc]

Not normally an issue for Director's of their own limited companies. It could be an issue regarding a Secretary - but it does depend on what contracts are in place.

I have never seen HMRC attack a director's/secretary's salary under National Minimum Wage regulations.

[Fotic]

UpTheIron said:

Fotic said:

It sounds very much as though this would see you breaking Minimum Wage laws, a criminal offence. Tread carefully as they do consider your salary in this regard.

NMW doesn't apply to company director unless there is an employment contract in place.

Interesting! HMRC looked into my salary once as part of an investigation and implied it could have been. Liars!

[Eric Mc]

They don't always apply their own rules correctly.

[98elise]

Eric Mc said:

Not normally an issue for Director's of their own limited companies. It could be an issue regarding a Secretary - but it does depend on what contracts are in place.

I have never seen HMRC attack a director's/secretary's salary under National Minimum Wage regulations.

I would be surprised if they did. Its not that unusual for a director to work for no wages at all (ie the company is not generating enough money).

[Eric Mc]

Exactly.

It's because of these fundamental differences that director's, although treated in general in a similar way to "employees" for tax and NI purposes, are a very different animal and consequently not every aspect of employee legislation applies to them.