If you’re a sole trader or partner in a business, and your company has no employed staff, payroll is one area you don’t have to worry about! That’s because you are legally the business and aren’t an employee, meaning you can breathe a sigh of relief and go put the kettle on while we discuss what to do when your company does have employers.
As the director of a Limited Company, the business is a separate entity to yourself, meaning the company should pay you a salary – even as a director!
So how do you pay yourself and your employees as a Limited Company?
As the director of the limited company you are responsible for managing the firm. This means you will get to decide how much you pay for your own salary. Directors often choose to pay themselves a salary of the average personal allowance for the tax year to avoid wasting the personal allowance and to keep entitlement to State Pension. They will often make up the rest of their income in dividends as this can help save tax.
Employer and Employee
Your contractors should be treated as an employee for tax purposes, meaning you should register with the HMRC to use PAYE to pay your employees salary.
PAYE stands for Pay As You Earn is a scheme managed by the HM Revenue and Customs. Companies operating a PAYE scheme must make monthly returns to HMRC in regards to their key payroll figures. PAYE is simple to use and work. Every month you are able to decide the gross amount you would like to pay as a salary before tax.
You will then collect the amount of tax and national insurance that is due, depending on your tax code. To calculate your tax and NI contributions you can either use the old fashion manual method of using the tables supplied by the HMRC or you can use a computerised system.
After completing this, you will have a net figure that can be paid to you from the company and a liability for the tax and NI that must be paid to the Revenue.
Struggling to understand how PAYE would work for your company? Let Pytronot take care of it for you!
With years of experience, Pytronot have a number of solutions for payroll depending on the type of work your agency or company are involved with. To find out more about our payroll services in London, call 0203 763 8666.