Your accountant is quite correct. As a basic rate taxpayer if you were to take salary from the company you will need to make the necessary PAYE Tax and NIC deductions on the salary you are paid using a BR taxcode, resulting in tax deduction at 20%.
If you take a dividend, and ensure this does not make you a higher rate taxpayer you will not pay any further income tax on this. It is therefore more tax efficient for you to take a dividend.
When a company starts you can request for a PAYE scheme to be set up on the new company notification form (CT41G). In your situation you will not need to set up a scheme unless you begin to pay yourself, or another employee, at a rate of £90 per week or more.
If you already have a scheme set up, but no remuneration is likely to be paid, the HMRC suggest that a covering letter is submitted to the PAYE tax office (or together with the end of year form (P35)) which highlights that no PAYE scheme is required, and save you paying the accountant for a service that isnít required.
By Jo Nockels
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