Salary, expenses and benefits
If you want the company to pay you or anyone else a salary, expenses or benefits, you must register the company as an employer. This includes handling processes associated with PAYE (Pay As You Earn), where the company deducts income tax directly from employees' salaries before payment.
The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HM Revenue and Customs (HMRC), along with employers’ National Insurance contributions. These measures also ensure that employer contributions to National Insurance are calculated accurately and submitted to HMRC as per legal requirements.
If you or one of your employees make personal use of something that belongs to the business, you must report it as a benefit and pay any tax due.
Dividends
A dividend is a payment a company can make to shareholders if it has made a profit.
You cannot count dividends as business costs when you work out your Corporation Tax.
Your company must not pay out more in dividends than its available profits from current and previous financial years.
Dividend paperwork
For each dividend payment the company makes, you must write up a dividend voucher showing the:
date
company name
names of the shareholders being paid a dividend
amount of the dividend
You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.
Tax on dividends
Your company does not need to pay tax on dividend payments. But shareholders may have to pay Income Tax if they’re over £500. This taxable amount must be reported in the shareholder's self-assessment tax return to ensure accurate and complete tax compliance.
Directors’ loans
If you take more money out of a company than you’ve put in - and it’s not salary or dividend - it’s called a ‘directors’ loan’.
If your company makes directors’ loans, you must keep records of them. There are also some detailed tax rules about how directors’ loans are handled.