You may have spent your entire working life earning a PAYE salary but now you are the boss, who pays you?
Working for your own limited company will allow you to receive money in three different formats. These are: salary, dividends and expenses.
Salary – you will become an employee of your own limited company, this will entitle you to receive a salary. The salary we recommend is a small amount, usually aligned with your annual tax-free personal allowance. This salary can be paid from the company on a monthly or annual basis depending on what suits you best.
Dividends – dividends will make up the majority of your income. Dividends are paid from the profit your company makes. Dividends are extremely tax efficient – in 2014/15 our clients could potentially have received £28,305 for no additional tax! Dividends can be taken from the business as regularly or infrequently as you like, providing the company has made sufficient profits.
Expenses – as you are an employee of the business, you are entitled to be paid for any out-of-pocket expenses you incur in carrying out your work. In contrast to a PAYE employee, you can claim mileage for travelling to and from work