Forgive me if this has already been asked - if so please point me in the right direction.
I, like many, pay myself £640 per month and take the rest in dividends. To avoid tedious monthly RTI declarations, how about registering as an annual scheme, declaring £7,680 in April and then "deferring" payment to £640 per month for the following year?
Presumably the only other RTI requirement would be at year-end?
What do you wise folks think?
Replies (8)
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In short - no!
The point of RTI is that it is alligned with the actual payments. Annual schemes are for when there is one annual payment. Twelve monthly payments means twelve monthly RTI submissions.
My recent experience is as follows 2 Companies both less than 3 employees. Salary limited to tax free allowance. Dividends for additional income. Registered for Annual Scheme still possible prior to 05/04/2014 provided there have been no submissions of EPS. Director's current accounts already in credit by far more than any 'drawings' during current year. EPS will be sent prior to 05/04/2014 for current year salary. You can register annual scheme by phoning 0300 200 3401 'Payment Enquiry line' - surprisingly helpful and prompt reply to phone call (ie not the usual ages hanging on) although you do have to use their automated question and answer routine and need to have tax refs and other company info ready to read out. Hope this is helpful!
DLA gives choice
If there is a sufficiently high credit balance on the Directors Loan Account (ie. £ 7,680 or more in the quoted example) then the strategy would be as follows:
Draw whatever upto to DLA credit balance from April to MarchAt month 12 (=March) put a year's salary through the payrollFor months 1 to 11 be aware of the need to report "no salaries / wages" via EPSBe very careful if the above is done in case a "month 1" / "wwerk 1" PAYE code gets issued by HMRC to be applied in March.Ensure that the payroll software is made aware that the director IS a director, otherwise excessive NIC costs would arise in month 12Probably little or no time saving using the above? BUT it does give flexibility in terms of directors salary, ie. non-commital to £640 per month until end of the tax year
Alternatively use a payroll software that makes monthly reporting easy - allegedly one software takes only "a few seconds a month" to make FPS reports of the £640 per month salary. Whilst overall time is saved it does NOT escape the burden of having to remember to make a monthly report to HMRC.
just a thought
would you not be better to pay 833 per month to obtain employers allowance.
One filing
If it is an annual scheme you need only send one FPS a year. No nil filings are needed (unless there is no payment at all).
Tax issues
PAYE allows one months worth of tax free pay per month. If you run an April payroll with an annual salary there will be a large tax deduction - the only reason an annual payment at the end of the year works is that you have built up a full years entitlement to allowances and rate bands.