Tax efficiency & the minimum wage

If you run your own limited company then it is likely that you are earning a relatively low salary and drawing most of your income via dividends in order to reduce your tax liability. If, like many business owners, you are working more than 35 hours per week, your hourly rate of pay will be lower than the national minimum wage. This could be a problem for you or your partner.

HM Revenue and Customs has adopted the approach that the minimum wage will not apply as long as you are an officer of the business and don't have a contract of employment. An officer is either a director or the company secretary so you need to ensure that you and your partner are officers as a starting point. The second key issue is to ensure neither of you has a contract of employment. If you had one previously with the business, this would need to have been formally terminated upon becoming an officer.

We operate payroll for a number of our clients, guiding them in this and other areas to ensure any potential worries are removed as well as taking away the administrative burden and all within a fixed monthly set of fees. If you'd like to learn more about payroll and tax efficiency, please call Graham on 0845 644 3579.