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New Company and Payroll

When do I start running a payroll in a new company

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I am about to set up my own limited company. Unless I decide to ask my wife to help me with its running, I expect to be the only employee. I am aware of the topic of only paying up to the LEL to avoid PAYE and NIC, and then declaring dividends if/when suitable income levels are available. However, I anticipate there will be several months before I start genetrating income (maybe 3 or 4 at least), and then many more months (perhaps as much as a year) before I reach my full-quota of desired clients. Does it make sense to start "paying" a salary from the company to myself in the early months, if I just have to inject cash into the company (by way of a loan, I presume), only to pay it back to myself, where perhaps the only benefit is early trading losses to offset agains subsequent trading profits, albeit it at up to 19% relief when sufficient profits are ultiamtely made. What am I missing (politely, please!)?

Replies (7)

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By Duggimon
23rd Jan 2019 12:35

You're missing the help and advice of an accountant who will be best placed to advise you of all the many pitfalls and opportunities around opening up your own limited company.

Free advice on the internet is not the same thing.

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By Accountant A
23rd Jan 2019 13:00

ASF wrote:

What am I missing (politely, please!)?

Paid for professional advice on your specific circumstances.

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By Tim Vane
23rd Jan 2019 15:11

I think you’ve missed the key point about loaning cash to your company to pay wages. You really need a sit down with an accountant. There are 8 questions I would ask up front most of which I suspect you have not asked yourself. Interview some local firms and see which you like.

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Replying to Tim Vane:
By atleastisoundknowledgable...
23rd Jan 2019 16:40

Tim Vane wrote:

There are 8 questions I would ask up front ...

... out of (professional) curiosity...?

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28th Jan 2019 12:39

Just of out interest, I have been to a local accountant, and all I get is "boiler-plate" back. If I want more, I have to pay more! I haven't even set up the company that I am being forced to, in order to contract with an organisation. I note with interest, that the "8 questions" didn't come forth, presumably as that might allow someone without this knowledge to understand a bit more. So, I have to go and pay good money I don't yet have for professional advice, and yet I see another blog request this morning about what further deductions an accountant might look to make for his client, and the advice is positively flowing. I wonder, when is advice not advice?!

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By lionofludesch
28th Jan 2019 13:55

Is your NI covered for this year ?

I'd still recommend going to an accountant. I'm not sure what you're expecting from one.

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By Matrix
28th Jan 2019 14:50

If you never get to use the losses then you could end up paying income tax on the salary (assuming you have already earned in excess of the personal allowance this tax year) with no relief in the company.

You will need an accountant to file the accounts so you may aswell get one now. Include it as a cost of accepting this contract and make sure you ask them about IR35.

You have until 5 April to make the decision on the salary and can set up a scheme and always file the submissions and pay yourself when the company has the cash (assuming this is the optimal extraction of profits).

I always set up payroll schemes unless the future profits would not exceed the salary or if the earnings are approaching any of the income tax thresholds (higher rate, loss of child benefit/loss of personal allowance).

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