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Whether or not you have run your own company or business before it is worth going over some basics. You will probably be aware that any salary paid to you, as a director or employee, must be paid under deduction of PAYE and NI. This is the simplest method of taxing remuneration.

However paying out all your income as salary is not normally a tax or NI efficient way of remunerating yourself, where you have a choice. As a director of your own company it is up to you decide how to best reward yourself for your efforts.

There is no statutory obligation for you to pay yourself any salary at all. As a director of your own company you are not bound by the national minimum wage requirements and in fact are not entitled to NMW for the work you do as an "office holder". There may be contractual reasons to make payment where you have a director's service contract with your company, but a contract is not normally necessary in a private limited company where the director(s) are also shareholders(s).

Common sense indicates that it is sensible to have a salary above the minimum NI "primary earnings threshold" so that you pay some National Insurance contributions and are therefore entitled to certain social security benefits. Again there is no statutory requirement to do so, or to pay a certain amount of salary and therefore NI.

Current tax, NI and other useful associated rates are set out here. Guidance on benefits can be found here.

You should note that employee's NI, deducted from your gross salary in excess of the lower threshold, will be 11% of the gross amount. In addition your company will incur employer's NI which is 12.8%.

Our advice to you is therefore to consider paying yourself a salary at a level above the bottom NI threshold but below the PAYE threshold.

Where appropriate you may also consider paying a salary to your spouse or partner. Please discuss your requirements with us.

The most administratively efficient way for you to pay yourself a salary, is to set a net monthly net amount, which you can draw by setting up a standing order payment from your company to you, payable at month end. As required we will process the payroll for you, and on a quarterly basis advise how much NI (and PAYE if appropriate) is due to HMRC. All you then need do is pay HMRC in accordance with our guidance. At each tax year end in April we will process the payroll annual returns for you.

Please remember to always advise us if your circumstances change and particularly if you wish to change the level of your salary.

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