If a limited company has employees, the company will have to register with HM Revenue & Customs for a PAYE scheme. Tax and National Insurance will have to be deducted from employee wages if they are paid more than the current thresholds. Directors of the company are classed as employees of the company, even if the company is just one person who will be regarded as an employer and employee.
As a limited company the business will have its own liabilities, assets and legal status. As a company director you are responsible for managing the company, which will entitle you to a wage. However, the business profits are not available to take whenever you like, as the profits belong to the company and any salary or remuneration you take for yourself should be paid using the correct channels. The rules for company directors paying National Insurance are slightly different to regular employees. For the purposes of National Insurance, a company director is recognised as an office holder. The office holder has a liability to Class 1 National Insurance Contributions provided the earnings are liable to income tax.
National Insurance Contributions should be calculated using an annual earnings period. The National Insurance which is due should be calculated each time the director is paid and any National Insurance Contributions already paid should be deducted. The operation of PAYE is time consuming and may be complex, especially for company directors of a limited company, which is why professional advice should be sought.
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