There is no need to register for PAYE if no employees (including directors) are paid above the Lower Earnings Limit for National Insurance, get expenses and benefits, have another job, or have a pension.
The LEL is £116 per week, or £6,032 per year in 2018/19. If a salary above this amount is paid or if any of the other conditions apply, the company must register a PAYE scheme with HMRC and report payments before they are made, otherwise penalties may be imposed.
Company directors often pay a minimal salary in order to obtain NI credits. However, without operating a PAYE scheme, no NI credit will be given in any case, as HMRC will not be aware of the salary.
To cut down on payroll administration and costs, an annual scheme can be registered with HMRC so that only one submission is made each year.
The director’s salary is taxed on the director at the earliest of:
- When the amount is credited in the company’s records
- The company’s period end, if the amount has been determined at that date
- If determined after the period end, the date determined.