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Accountant and difference of opinion

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Happy Friday AccountingWeb,

I have an accountant but he says I can't do something, and I just wanted to get a second opinion from all of you. 

I'm director of limited company and also work full time for a firm ( PAYE and all that stuff). I want to my pay myself the max limited director salary of 8,632. I've withdrawn some of this already from business bank account can I withdraw the rest as a lump sum? He is saying I can't he says because of Employment allowance ( but I've read this has nothing to do with it as I can't claim this anyway as I'm a one director company). So I don't know what hes on about, I've told him this and haven't received a reply ( 4 days ago).

But from my understandings I can and the process would go like this -  I will just withdrawal the salary as a lump, then put that amount as expense on my company accounts and the salary figure on my self assessment with the rest of my PAYE full time job.

So I don't understand why he said its not possible?  Thank you for reading! 

David

Replies (15)

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By Crouchy
05th Jun 2020 17:15

are you sure your accountant said its not possible?

I'm guessing your accountant probably said its possible, but probably not the best strategy if you want to be tax efficient in light of your other income

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By Sandnickel
05th Jun 2020 17:25

I agree with busacran. Are you sure he said "can't" rather than "shouldn't"?

It's not as simple as you think. Due to you having another job the whole of the amount you take from your company would be taxed at BR (and you would have to set up a PAYE account if you don't already have one for the company). To take the 8632 (which is last years max I believe?) you would have to gross the payment up which would cost you in tax and NIC. You would then need to pay over tax & NI deducted to HMRC.

You can't self assess PAYE income from your company, it would have to go through an RTI.

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By lionofludesch
05th Jun 2020 17:32

One snag is that you get your £12,500 personal allowance in monthly slices. So, by the end of June, you've only got ¼ of £12,500, or £3,125, to set against your £8632.

That leaves £5,507 taxable, so youi'll need to send £1,100 to HMRC. In theory, you can get it back in monthly slices of about £123 for the rest of the tax year but - hey - good luck with that.

There could be other snags as well. We can't say from the information you give.

Employment allowance is a red herring, though. So long as you're not on the alternative method of calculating NI. If you are, there's another cash flow issue.

To be honest, I'm not clear what you're trying to achieve here. If you have profits you might be better off with a dividend if this is a second job.

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By Cheshire
05th Jun 2020 17:59

You have misunderstood/misheard.

Be patient, give the Accountant chance to come back to you, he probably has lots to do due to covid.

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By Southwestbeancounter
05th Jun 2020 17:46

Are you sure that he said you couldn't because of the Employment Allowance?

Might he have said you couldn't because of AE and you thought he meant EA? i.e. was he thinking you might get caught for Automatic Enrolment?

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By mikeyban
05th Jun 2020 18:09

Unless you are making losses and assuming you are obtaining a tick in the box for the pension then you would be better taking dividends.

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By Matrix
05th Jun 2020 18:27

I disagree. Unless David is making losses then, after taking £2k in dividends, he is better off taking the next £732 pcm as a salary assuming he has been a Director since 6 April and files monthly RTI under a payroll scheme. It may be the latter part which is causing crossed wires with his accountant.

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Replying to Matrix:
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By Sandnickel
05th Jun 2020 18:36

Why would that be? He would be paying 20% tax on the payroll (he has another job), to save 19% CT??

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By Matrix
05th Jun 2020 19:11

Because if he took it as a dividend then there would be additional tax which is more than the 1% difference you have identified. What would you propose? Bearing in mind that neither of us are his accountant and don’t know his marginal tax rate etc. and he is already extracting the money so it has to be one or the other.

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Replying to Matrix:
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By Sandnickel
05th Jun 2020 19:33

You're right of course. I was focused on the payroll being BR and it costing him rather than being tax free as he seems to think it is.

What would I propose? Do we think it matters? I reckon the OP is going to take the money anyway (if he hasn't already), don't you?

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By Truthsayer
05th Jun 2020 18:14

We don't know exactly what the accountant said, or why. Nor do we know your full circumstances. For those reasons it would be wrong to express an opinion. I would give it a few more days, then contact your accountant again and request a reply.

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By Tim Vane
05th Jun 2020 19:14

You will need a PAYE scheme and the RTI submissions for that scheme would need to be made before you can take any salary. You would also likely need to consider AE. Whether the hassle is worth any marginal gain that may be made is not for us to say with the limited info available, but it is exactly the kind of pub-conversation inspired scheme that I would have to spend time talking some of my dumber clients away from. As was pointed out a few days ago, these pub conversations do not seem to have stopped despite the pubs all being closed. (Sigh)

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By jvenegas16
06th Jun 2020 10:59

Where you go wrong is on paying yourself the max limited director salary of £8,632. You are already on PAYE on another job and your personal allowance (not your employment allowance, which has to do with employer's NI) may well be used up (i.e. £12,500). That's why you cannot do it in the way you think. In fact, if you are referring to saving paying NI, the amount is up to £9,500 for 2020/21.
Therefore, the amount you are referring to will be taxable at 20%.

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By Paul Crowley
15th Jun 2020 15:47

It has been 2 weeks now. Better give the accountant another call

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By sparenaut
01st Jul 2020 16:11

It beats me why people engage an accountant and then try to tell them how it is done.
Leave it to the experts - it's what you pay them for.

By the way, I agree with Sandnickel. This should go through a PAYE scheme and monthly RTI reports submitted. There will be tax to pay.

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