Directors only payroll and coding notice

2016/17 PAYE coding notices     

As we know the new dividend tax comes into effect on 6 April 2016 – if you are not yet aware of this then please do read our previous blogs or contact us to find out more.

In the last few days, HM Revenue and Customs have notified us of a further development on this.

Currently, you enter the dividends you have taken in the tax year onto your self-assessment tax return and pay the tax due on this once the return has been submitted to HM Revenue and Customs. This means you get a slight delay in when you take the money to when the tax is due.

Under the new rules, HM Revenue and Customs may be amending PAYE tax codes so that your personal allowance is reduced in the year and you begin paying tax at a lower rate.

What we are concentrating on in this blog is those individuals that have a ‘directors only payroll’. This is a payroll that is run throughout the year that falls below the tax and national insurance guidelines meaning no PAYE is paid. This amount is entered into company accounts as an expense and onto the individual’s personal tax return as income.

The warning from us is to be aware of this if you run your own directors only payroll. If you receive dividends from a company and HM Revenue and Customs reduce your tax code, you may then become liable to start paying PAYE.

If you need any further explanation on this then please contact either Fiona in our payrolldepartment ft@obcaccountants.com or Katy Biffen katyb@obcaccountants.com who
bothwill be happy to answer any questions.

 

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