020 31 37 64 62
Online Accounting. Real Support.

Director's Payment Policy

We suggest that you decide on a strategy for paying yourself as a Director early on in your business' life.  

Following simple guidelines will ensure that you don't have any unwelcome surprises when HMRC decides to audit your company.

The areas to consider are:

Monthly PAYE Salary

Decide how much PAYE salary to take from the company each year.  Depending on profits we would suggest a minimum of £12K per year - assuming you are working full time on the business and have no other employment.  This makes use of a tax free allowance; is above minimum wage and keeps your NI contributions topped up.  Tempo automatically runs payroll for you once we have set your salary levels.

Dividend Policy

Ideally you would declare a dividend every quarter (based on profits).  This is a very non-contentious approach and is inline with how most sizeable businesses operate.  If you declare dividends very frequently (or extract profits without declaring a dividend) then you are at risk of having this income treated as a salary.  Tempo can help you declare and record dividend payments officially.

Expenses Reimbursment

If you are personally incurring expenses on behalf of the company (e.g. using your own vehicle for travel or paying for company items from your own account) then the company should pay you back on a regular basis.  We'd suggest paying this on the same day as your salary payment once a month.  Tempo easily shows how much the company owes you at any point in time.

Please get in touch if you would like to discuss any of the above, or make changes to your automatic salary.