Salary Dividends Strategy

Introduction:

As a director of a limited company you are employed by the company for the provision of your services.  It is therefore essential that the company pays you a salary on a periodic basis (e.g. weekly, monthly, quarterly, or annually) reflective of these services.

In order to pay staff a salary or bonus (or both) the company must be registered as an employer with HMRC, and all staff must be registered employees of the business.  The business must prepare Real-Time Information (RTI) submissions to HMRC on a periodic basis dependant on the frequency by which it pays its staff, summarising the payments made and the taxes withheld at source (including Pay-As-You-Earn (PAYE), Employee’s National Insurance Contributions (NICs), and Employer’s NICs).  All taxes withheld at source must be promptly paid over to HMRC. And at the end of the tax year the company as the employer must provide all employees and HMRC with a P60 Payroll and Tax Summary, and optionally a P11D in respect of any taxable benefits-in-kind (e.g. company cars or interest-free loans) which have been received.  And the net value paid to staff, along with the associated values of employment taxes are all deductible expenses for Corporation Tax purposes.