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  • Tax

    Pay Roll for Company Landlords

    Hi

    I am looking to pay my wife a Salary from Our Company

    We are both Directors and my wife is a Basic rate tax payer

    I would like to pay her every month from the Company Account

    Can you inform me if there is a simple software program I can run to work out Tax and NI deductions

    Can you also please inform me how often I would send Tax and NI contributions to HMRC

    My wife is a Basic tax payer but also has a full time job

    so I would imagine all income paid would be liable for Basic rate tax

    advice on what you find best please way of doing this and the cost of the software needed

    Regards DL

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    Learn Change and Adapt ?????

    Hi dislexic

    Since your wife is employed by another company and in receipt a salary from there she will already be using up her personal allowance so there is no real advantage to paying her a salary from your own company.

    If your company pays her a salary then she will be taxed at 20% on everything she is paid up to the higher rate tax band after which she will be into higher rates of tax and subject to 40% tax.  Furthermore everything she earns form your Own company in excess of £8,164 per year will be subject to Employees National Insurance at 12% and the company will pay 13.8% Employers NIC.

    On that basis your wife would be better off receiving dividends rather than a salary.  In fact even higher rate taxpayers are better off receiving dividends rather than salary even with the increase in the dividend tax.

    As an example if the company has £10,000 of profits which it can pay as salary or dividend then the figures would be as follows:

    Salary - First deduct the employers NIC of £222.64 leaving a salary of £9,777.36 from which would be deducted £1,955.47 in tax and £193.60 in employees national insurance.  This would leave your wife with £7,628.29 in her pocket.

    Dividend - The company would currently pay £1,900 in corporation tax on the £10,000 leaving a dividend of £8,100 which assuming no other dividends would mean the first £5,000 is taxed at nil and the balance at 7.5% giving your wife a tax bill of £232.50 and leaving her with £7,867.50 in her pocket which is higher than the salary figure above.  Even in the next tax year when the nil rate dividend falls to £2,000 she would still keep £7,642.50 which is better than the salary option.

    There is software you can buy to do these calculations for you but I personally think they are over priced plus as you can possibly tell I do this for a living hence how I know what to do.

    As for payroll software if you do register with HMRC for a payroll then they had used to provide software fee of charge but I believe that they are stopping offering that facility.  If that is the case the a company called Brightpay offer some very good software for £99 per year.

    I hope that the above helps.

    Regards

    Nigel

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    You have confirmed what I though was right

    I have just come off the phone to my Accounts and they have given me a number of options

    and I think this is the one I will use

    Pay my wife a Salary once a year of £8000 and pay the tax at 20% ie £16000 and pay the net amount of £6400 into her account

    My accountants have said they could do all the paper work once a year to keep costs down 

    The company already pays into my Directors Pension  as I am a 40% Tax payer

    and after I have exusted the two routes I think Dividend is the only other way to go

    I already keep strict accounts of travel so this is paid Tax free which is good

    Thanks for the help I am obliged

    DL



     

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    Learn Change and Adapt ?????


    Since your wife is a director of the company you could also pay into her pension as well even without her receiving a salary from the company.

    Regards Nigel

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    she is 15 years younger than me so salary is nice to have to pay for Hols ect

    But you are right Pension for her is on the hit list as the Company grows

    This is the draw back of company formation  It avoids S24 but getting cash out is not as easy as personal BTL

    This is why I have said in my blogs S24 is not enough reason to form a company

    they have there place but not for everyone


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    Learn Change and Adapt ?????


    As you will possibly have seen from my own Blogs.  I am firmly of the belief that owning property through a company does not meet everyone's needs and for those that it does I usually recommend owning some property personally as well - so they hedge their bets as to what a future Chancellor may do.

    If we don't contact one another again before the weekend - have a great one.

    Regards

    Nigel

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    my pleasure chatting with you enjoy your weekend

    DL

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    Learn Change and Adapt ?????

    <!--{cke_protected}%3Cmeta%20name%3D%22generator%22%20content%3D%22Sheets%22%20%2F%3​E-->

    No of Companies0123456
    Salary each company8,160.008,160.008,160.008,160.008,160.008,160.008,160.00
























    Profit before salary60,000.0060,000.0060,000.0060,000.0060,000.0060,000.0060,000.00








    Salary0.008,160.0016,320.0024,480.0032,640.0040,800.0048,960.00








    Profits after salary60,000.0051,840.0043,680.0035,520.0027,360.0019,200.0011,040.00








    Corp tax @19%11,400.009,849.608,299.206,748.805,198.403,648.002,097.60








    for dividends48,600.0041,990.4035,380.8028,771.2022,161.6015,552.008,942.40








    Salary0.008,160.0016,320.0024,480.0032,640.0040,800.0048,960.00
    Dividend48,600.0041,990.4035,380.8028,771.2022,161.6015,552.008,942.40








    Taxable Earnings48,600.0050,150.4051,700.8053,251.2054,801.6056,352.0057,902.40








    SA100 Tax3,307.503,811.254,917.506,441.577,965.328,764.409,565.15
    Corp Tax above11,400.009,849.608,299.206,748.805,198.403,648.002,097.60
    Total Tax14,707.5013,660.8513,216.7013,190.3713,163.7212,412.4011,662.75
















    Money Recd in hand45,292.5046,339.1546,783.3046,809.6346,836.2847,587.6048,337.25
    % recd75.49%77.23%77.97%78.02%78.06%79.31%80.56%








    Tax Saving
    1,046.65444.1526.3326.65751.32749.65
    Total Tax saving
    1,046.651,490.801,517.131,543.782,295.103,044.75








    5 Individuals
    5,233.257,454.007,585.657,718.9011,475.5015,223.75









    These are my calculations for 17/18 where members are paid a max of £8160 from individual companies with a total profit before tax of £60k per person thus avoiding all nat ins

    unless i have missed something i am going to explore this avenue

    any comment welcome

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    FCA 32 years in practice, BTL since 1992