PAYE Scheme For A New Limited Company

I started my own small limited company to deal with a small sideline business venture. As I am already employed and paying tax a basic rate my accountant suggested that it is more beneficial for me to take dividends rather than salary from this company. As I am not paying any wages do I still need to set a up payroll scheme for the company, as the accountant wants to charge me for this?

1st January 2009

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

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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