Salary to Dividend

angmc

Hi

One of our directors who has been on the payroll has decided to start taking a dividend rather than a salary. I was just wondering how I deal with this on Sage payroll. Do I just process him as a leaver and issue the P45 etc. He has not been processed at all under RTI in the new year (2013/14).

Thank you.

deborahcarpenter

Why does he not pay himself £7696 pa through PAYE (this would avoid any NI and paye tax) and then take the rest as a dividend. His paye payment gets posted to Directors Salary and just set up another nominal code for dividends., you cant put him as a leaver because he hasnt left.
Debbie

angmc

Hi Debbie

Well he turned 65 in February 2013 so he doesn't pay employee NI now so I suppose the idea is to save the company paying Employer NI (he's the owner of the company). Apparently he's looked into all the pros & cons of dividends v salary and decided this is the best option, I'm not sure whether it is or not?! To be honest I'm not in a position to advise him as I'm not qualified (I'm studying AAT Level 3 at the moment). I know what I'm doing with regards to recording the dividends on Sage accounts, I've set up a code in the 3000s so will post a BP to there. So with regards to Sage payroll do I leave him on there then and just not process him every month?

deborahcarpenter

If he pays himself the amount i have said there are no employer NIC either.
Yes you ned to leav him on the Sage payroll system and only process him when and if you pay him through PAYE.
Debbie

angmc

Hmmm interesting. Thanks very much for your advice, I will pass it on to him.