If you run your own business operating through a Limited Company you will usually pay yourself a mix of salary and dividends.
Current year salary and dividend strategy
Each year we produce an update on what the current suggested mix would be.
If, for whatever reason, you have not set up a payroll then you can still pay yourself a small salary.
A business does not have to register with HMRC for payroll if it does not pay workers at an amount over what is referred to as the Lower Earnings Limited.
Each year the amount of the Lower Earnings Limited changes.
For the tax year 2019/ 2020 the current Lower Earnings Limited is £118 per week or £512 per month; details can be found on the GOV.uk web site – CLICK HERE
Caution should be exercised as, at this level of pay, you will not get National Insurance credits towards your state pension. So this is a strategy best not employed for the long term.
As a director, if you do register for PAYE during the year you may be able to bring your salary payments up to date. This is something you should discuss with your accountant to make sure that you have the most appropriate salary and dividends strategy for your business.
Register for payroll
If you do want to pay a salary at an amount over the Lower Earnings Limit then you must register for PAYE with HMRC which means that you will have to file regular Real Time Information (RTI) reports.
You can register on the GOV.uk website – CLICK HERE
For more information on when to register with HMRC for payroll – CLICK HERE