Numerico Chartered Certified Accountants

Businesses (especially new businesses) often can’t afford to pay its directors. This can mean losing out on tax and NI advantages. Even whilst as the owner you are dipping into your own pockets to fund your new business venture you should still pay yourself a salary. There are compelling reasons why you should do just that, especially when this might not cost you a penny in tax or NI.

For every pound of salary your company pays you it will get a reduction from its Corporation Tax (CT) bill of at least 20p (the current small profits CT rate is 20%). And where the company makes a loss, the salary will increase this. The increased loss can be carried forward and set against later profits to reduce the CT bills in these years. But to receive this tax deduction your company will have to fund the salary.

If you're using your own capital to live off as well as fund the new business, you probably aren't using your annual tax and NI-free allowances. If that's the case, you can award yourself up to £7,228 for 2011/12 with no tax or NI to pay neither by you nor by your company. 
So is there a way to achieve this without the company having to actually pay you?

HMRC will use a “web robot” to search out traders who aren't registered, and fine them. What steps should new businesses take to make sure they're not penalised?
These days most businesses consider an Internet presence essential to their trade. HMRC has latched on to this fact and intends to use web robots to act as spies. These search programs will monitor millions of web pages and extract information, such as names, addresses and possibly much more.

Once the information is collected it will first be compared with HMRC's database of registered businesses. So if you haven’t registered your newly formed business within set deadlines you might be at risk of a challenge from HMRC. The result could be financial penalties.