can we be employee of our own company?

On this visa. Can we be on PAYE of our own company? The condition is No employment other than working for your own business. Thanks

Yes you can .........as you can only work for your own business

entrepreneur123, you are a Director of your company? As a Director you are the holder of an office in the company, and income as the holder of an office is taxable under PAYE, in the same way as an employee would be taxed.

Is a Director also an employee of the company? No, not unless they have been issued with a contract of employment, which would be unusual in a Director-controlled company.

Thanks for your reply. So as I director I can take salary under PAYE plus dividends. I was concerned as I read on forum before that you cannot be on PAYE of your company as visa restrict us of no employment.

agree with you, found same thing on gov website

https://www.gov.uk/employment-status/director

John wrote:entrepreneur123, you are a Director of your company? As a Director you are the holder of an office in the company, and income as the holder of an office is taxable under PAYE, in the same way as an employee would be taxed.

Is a Director also an employee of the company? No, not unless they have been issued with a contract of employment, which would be unusual in a Director-controlled company.

@ entreprenour123, yes u can be, as far as ur registered for PAYE. But of course you can not consider ur self one of the full time employee u have to appoint. It's always a good idea to pay ur self monthly.

@ entrepreneur123, why will you want to be an employee in your business when you are already a director in the same business and as a director you could get your payment through dividend which can be drawn from your business either monthly, quarterly or even yearly.

I assume that you are looking for a way of getting monthly salary out of your business, but bear in mind that if you then decide to get the salary as a payee, the salary is not part of your investment funds of 50k/200k so in my opinion, its just an unnecessary idea to get payment on payee as a director of a business on Tier1 entrepreneur visa.

As a director you have two options to take salary, one is PAYE and one is dividends. Yes ofcourse i am not taking 50k or 200 k as my salary. but the money i am receiving from my clients, i will be taking that as PAYE plus dividends. As stated in above link, if director is taking money out from his company as PAYE, this does not make him employee of the company.... taking money as PAYE plus dividends is more tax efficient thats why i want to use PAYE.

Olasunkanmi wrote:@ entrepreneur123, why will you want to be an employee in your business when you are already a director in the same business and as a director you could get your payment through dividend which can be drawn from your business either monthly, quarterly or even yearly.

I assume that you are looking for a way of getting monthly salary out of your business, but bear in mind that if you then decide to get the salary as a payee, the salary is not part of your investment funds of 50k/200k so in my opinion, its just an unnecessary idea to get payment on payee as a director of a business on Tier1 entrepreneur visa.

entrepreneur123 wrote:As a director you have two options to take salary, one is PAYE and one is dividends. Yes ofcourse i am not taking 50k or 200 k as my salary. but the money i am receiving from my clients, i will be taking that as PAYE plus dividends. As stated in above link, if director is taking money out from his company as PAYE, this does not make him employee of the company.... taking money as PAYE plus dividends is more tax efficient thats why i want to use PAYE.

Dividend income technically comes only after net profit is calculated. However, you can pay dividend on a monthly basis since accountants 'outward project' the entire financial year and then 'adjust' for the financial year as required from monthly balance statements.

If you take a salary under PAYE, then company has to pay the PAYE + NIC contribution on behalf of you, as an employee.

There is no ideal combination to split income from Salary (PAYE) & Dividends.
However, since there is no NIC required on dividends + there is no double taxation on dividends, that gives you a bit of tax advantage if the majority of income is from dividend payments.

As a rough figure: 2013-2014 FY

You can take up to £41450 per year(gross) on Salary + Dividend combination on the base tax rate of 20%. Example only, please do not quote me on that. It also assumes 100% shareholding. This will also largely depend on other personal circumstances and incomes received, so its best to consult your accountant.

agree with you. so if we withdraw e.g personal allowance only from salary then that will be tax free, and as employer we dont need to pay NIC etc. and ofcourse other remaining amount can be dividends.....

vin123 wrote:

entrepreneur123 wrote:As a director you have two options to take salary, one is PAYE and one is dividends. Yes ofcourse i am not taking 50k or 200 k as my salary. but the money i am receiving from my clients, i will be taking that as PAYE plus dividends. As stated in above link, if director is taking money out from his company as PAYE, this does not make him employee of the company.... taking money as PAYE plus dividends is more tax efficient thats why i want to use PAYE.

Dividend income technically comes only after net profit is calculated. However, you can pay dividend on a monthly basis since accountants 'outward project' the entire financial year and then 'adjust' for the financial year as required from monthly balance statements.

If you take a salary under PAYE, then company has to pay the PAYE + NIC contribution on behalf of you, as an employee.

There is no ideal combination to split income from Salary (PAYE) & Dividends.
However, since there is no NIC required on dividends + there is no double taxation on dividends, that gives you a bit of tax advantage if the majority of income is from dividend payments.

As a rough figure: 2013-2014 FY

You can take up to £41450 per year(gross) on Salary + Dividend combination on the base tax rate of 20%. Example only, please do not quote me on that. It also assumes 100% shareholding. This will also largely depend on other personal circumstances and incomes received, so its best to consult your accountant.

entrepreneur123 wrote:agree with you. so if we withdraw e.g personal allowance only from salary then that will be tax free, and as employer we dont need to pay NIC etc. and ofcourse other remaining amount can be dividends.....

@ entrepreneur123, if your plan is to first take your yearly personal tax free allowance of £9,440 as PAYE from your business, you should be aware that you will have to pay PAYE NIC of £203.04 and employer's NIC of £240.67 making total NIC of £443.71.

So my point is that you should not assume that you wont pay any NIC contribution if you take some payment through PAYE system.

thanks for your reply,
I have already put myself on PAYE of my company, hopefully it will not be issue with UKBA.

Olasunkanmi wrote:

entrepreneur123 wrote:agree with you. so if we withdraw e.g personal allowance only from salary then that will be tax free, and as employer we dont need to pay NIC etc. and ofcourse other remaining amount can be dividends.....

@ entrepreneur123, if your plan is to first take your yearly personal tax free allowance of £9,440 as PAYE from your business, you should be aware that you will have to pay PAYE NIC of £203.04 and employer's NIC of £240.67 making total NIC of £443.71.

So my point is that you should not assume that you wont pay any NIC contribution if you take some payment through PAYE system.

It does seem a bit much like hard work, for what you will save. I'm sure dividends would be easier, but then I'm no accountant!

actually taking salary(paye) is more simpler compared to dividends. Because if you take dividends then you need to submit self assessment to HMRC separately as director in addition to normal company accounts.

ecaLegal wrote:It does seem a bit much like hard work, for what you will save. I'm sure dividends would be easier, but then I'm no accountant!

Yes but if you on PAYE then you have to pay tax n NI, plus your employer tax contribution too??? and in this case you r employee and employer too? this is my understanding and other members have advised in better details.

regards

entrepreneur123 wrote:actually taking salary(paye) is more simpler compared to dividends. Because if you take dividends then you need to submit self assessment to HMRC separately as director in addition to normal company accounts.

ecaLegal wrote:It does seem a bit much like hard work, for what you will save. I'm sure dividends would be easier, but then I'm no accountant!

no one is stopping us to be employer and employee at the same time on this visa?

rehan01 wrote:Yes but if you on PAYE then you have to pay tax n NI, plus your employer tax contribution too??? and in this case you r employee and employer too? this is my understanding and other members have advised in better details.

regards

entrepreneur123 wrote:actually taking salary(paye) is more simpler compared to dividends. Because if you take dividends then you need to submit self assessment to HMRC separately as director in addition to normal company accounts.

ecaLegal wrote:It does seem a bit much like hard work, for what you will save. I'm sure dividends would be easier, but then I'm no accountant!

Just to update: Before writting this question here, i did phone to home office asking them if we can be on paye of our company. But the guy over the phone wasnt sure and said that he will check n get back to me. Today got phone call from Home Office, he told me that case worker have confirmed that we can be on paye/take salary from our own firm. But we cannot claim this as expenditure as a part of our investment funds. Thanks

keep up hard work buddy

entrepreneur123 wrote:Just to update: Before writting this question here, i did phone to home office asking them if we can be on paye of our company. But the guy over the phone wasnt sure and said that he will check n get back to me. Today got phone call from Home Office, he told me that case worker have confirmed that we can be on paye/take salary from our own firm. But we cannot claim this as expenditure as a part of our investment funds. Thanks

Get it in writing, these things need legal confirmation...

Wanderer wrote: Get it in writing, these things need legal confirmation...

I 2nd that.

Look at the policy guideline, Page 9, Point 36 & 39. You can give yourself salary as long as it does not counts from your original capital requirements. So i think you will have hard time during extension. Now if the business is making money, that is good and i think there will be no issue but standard business needs 3 to 4 years for ROI which means by the time your extension you may be showing that you are taking money from your original funds.

@ entrepreneur123 is right that you can take salary from your business as a director because its a standard tax efficiency procedure use by directors to reduce their tax bill and it is allowed under the UK tax law.

For the purpose of the tier 1 entrepreneur visa, salary taken by director will not count as investment. This is done to avoid those that will simply put money into their business account and then pay themselves salary from it without investing the money in the business.

One issue to be careful of is not taking salary in a business that is not making income as there would be no justification for doing so and also any salary taken from the business can count as expenses rather than the cash going to profit for which the tax man will have to take corporation tax.

thanks so it means you we should combine both.

I think the most tax-efficient way is to take salary monthly ( as PAYE, that HO has allowed) than waiting up-to the year-end for the dividends. Yes of course it will demand for more paper works at the time of extension to categorize the expenses. But I believe that is doable.