One of our directors who turned 65 in Feb 2013 and has been on the payroll has decided to start taking a dividend rather than a salary. I was just wondering how I deal with this on Sage payroll. Do I just process him as a leaver and issue the P45 etc. or do I just leave him on there but not process him each month. He has not been processed at all under RTI in the new year (2013/14).
No idea about Sage payroll as would touch it with a bargepole.
on the more general questions.
He's not a leaver as he's not left the company.
Are you sure of your calculations as once the director is 65 they stop paying class 1.
salary paid to directors is an expense of the business but dividends are payable only from taxed profits.
Just ensure that the sums have all been done properly before the director makes a final decision as to which way to go.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for the reply. Yes he has stopped paying Employees NI but the company still pays Employer NI which I think is one of the reasons for the change to dividends. However I've now been advised that he can earn an annual salary £7697 without incurring PAYE or Employers NI so maybe the salary & dividend route might be a better idea. Any advice would be gratefully appreciated as neither of us is an expert in this field!!
You really need to do your calculations both ways around assuming that
1) profits are taxed and then a dividend paid.
2) Salary if taken from pre tax profits reducing the taxable profits of the company.
I know, it's very much swings and roundabout and really isn't as cut and dried as people assume.
As you say, there will be no Employers NI until you hit £7697 so you need to calculate out that and the PAYE for the salary to be taken and compare that agains the profit that company would pay tax on.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I feel lucky that I don't actually have any partnerships so I'll leave that answer to someone with more hands on experience.
My take would be though that the difference is going to come down to the directors of a limited company are employees of the company where partners in a firm are a collection of self employed individuals so quite a different scenario as partners salary is a distribution of the profits rather than really salary in the traditional form.
As I say though I'm no expert on partnerships so not the best person to ask on that one.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
