Directors of a company regularly ask us what is the most tax-efficient way to pay themselves through their limited company, depending on the directors' personal circumstances there are different ways to do this.  If the company is your sole income then submitting a salary through the PAYE system whilst taking dividends may be the best way for you. 

What is a director payroll? 
 
Directors payroll is where a director chooses to put themselves through a company PAYE scheme, whilst Directors of a Limited Company are also shareholders, they are also classed as an employee of the company rather than being considered ‘Self-Employed’, meaning they can be paid via PAYE. Depending on their circumstances, many Directors choose to receive a salary up to either their non-taxable allowance or take a larger salary and pay through the PAYE system. 
 
Who submits the director payroll? 
 
Your software for payroll can be submitted directly to HMRC for you if you are processing your own payroll or ask your accountant to submit it on your behalf. 
How does a director then pay themselves? 
 
Being a company director means you are able to take a more flexible approach to how and when you pay yourself. In most cases, this means taking a tax-efficient ‘split’ income, where part of the money you pay yourself from the company comes from a salary (through the PAYE system) and the other part comes from dividends drawn from the company. These amounts are then drawn by the director from the company accounts. 
Depending on your personal tax position this may not be what is the best way for you, there may be other options that are more tax-efficient depending on your circumstances. 
 
If you have any questions regarding the above T-Bite please get in touch for free and confidential advice on 01482 210876 
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