How do I pay my student loan?

To pay a dividend, you need to:

• Hold a directors' meeting to ‚Äòdeclare' the dividend.
• Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.
• Issue dividend vouchers

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Unallocated payments are where the client has given you more money than they owe.

There are various ways to pay your suppliers. Common payment methods include bank transfers, credit card payments and Letters of Credit.

The optimum salary for a contractor to pay themselves in the current tax year is dependent on their overall income throughout the period.

In the instance there is no other income to be considered, it is generally recommended that salary is paid in line with the Secondary National Insurance threshold which is currently £732 per month (20/21).

As a limited company director, you may pay yourself through taking a salary and drawing dividends.

Salaries are typically paid out monthly. While dividends can be drawn at any frequency across the year-as long as there are sufficient distributable profits-payments are typically made on a monthly or quarterly basis.

Healthy cash flow is one of the most powerful weapons in a small company's arsenal.

In fact, cash on hand can be the deciding factor in a customer's choice to buy from your company or a competitor.

For instance, imagine landing the large order of your dreams, but losing the business to a competitor because you lack the capital necessary to prepay for the products needed to fill the customer's order. Fortunately, you can avoid this pitfall by making a few simple changes in your operations.

Below is a look at seven ways to grow your monthly cash flow by reducing expenses.

For employers, the deadline for paying National Insurance will vary depending on the amount payable.

If the amount payable exceeds £1,500, the deadline will fall on the 22nd of the month (or the 19th if payment is made by post).

If the amount payable falls below £1,500, you can make quarterly payments instead of monthly ones. The quarters end on 5 July, 5 October, 5 January and 5 April, and payments are due on the 22nd of the month (or 19th is payment is made by post). For example, for the quarter ending 5 July, the payment must be made by 22 July.

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To pay an overseas supplier, you need to:

• Decide on a payment currency
• Select a payment method: There are various payment methods and payment service providers available, including bank transfers, credit card payments, PayPal and TransferWise. When you're choosing a payment method or provider, you need to think about the currencies available, fees, exchange rates, speed of international transfers and payment reconciliation capabilities.
• Obtain the information you need to process the payment: You may need to obtain different types of information from your supplier, depending on the payment method you agree on. These may include their full name and address, bank account number, routing number and branch number and address.

If you're paying an employee for the first time, you'll need to set up payroll. You need to take the following steps:

1. Register as an employer with HM Revenue and Customs (HMRC) and get a login for PAYE Online.
2. Choose payroll software to record employee's details, calculate pay and deductions, and report to HMRC.
3. Collect and keep records.
4. Tell HMRC about your employees.
5. Record pay, make deductions and report to HMRC on or before the first payday.
6. Pay HMRC the tax and National Insurance you owe.
   

To pay a dividend, you need to:

• Hold a directors' meeting to ‚Äòdeclare' the dividend.
• Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.
• Issue dividend vouchers.
  

If you're operating as a sole trader, you can contribute to a personal pension scheme.

If you're a limited company director, you can make pension contributions as an individual (as an employee), as well as through your company (as an employer). For the latter option, your pension contributions are paid directly from your business bank account.

As a limited company director, you can access the money in your company bank account through a facility known as a director's loan.

This can come in handy in instances when your personal finances are in need of a boost, yet taking out a director's loan is a decision that requires careful consideration. That's because there are tax and accounting implications, and it's best to speak to an accountant so that you fully understand the consequences.

But before you dive into the details, you'll need to have an understanding of the basics-such as what a director's loan account is, what the loan can be used for, tax rules you need to be aware of and more.

Here's where our guide comes in:

If you're the director of a limited company, you're also considered an employee. As such, you may pay yourself a salary through the PAYE scheme-which is similar to how other employees of the company receive their pay.

You'll need to register as an employer with HMRC (even if you're only employing yourself as the sole director of a limited company), set up and run payroll, report to HMRC and abide by HMRC's record keeping requirements.

A director's loan is defined as money taken from your company that isn't either of the following:

• A salary, dividend or expense treatment
• Money that you've previously paid into or loaned the company
  

A Director's Loan Account (DLA) is a record of all transactions between the company and its directors. It records not just the money owed by the directors, but also the money owed to them.

Director's loans can be used:

• when you need to access money in your company-apart from what you take out as a salary, dividend or expense treatment-for personal reasons.
• for a variety of purposes, such as covering the costs of a home repair bill, travel plans or any unforeseen personal expenses that may arise.

There are various ways to repay a director's loan.

• Dividend: A dividend can be declared, and the money can be used to pay off the loan instead of being transferred to the director's personal account.
• Cash repayment: A repayment is made by transferring money into the company account.
• Expenses or salary: The loan can be paid off using other money to the director, such as the director's salary or expense reimbursements.
  

How you pay your National Insurance contributions depends on your employment status.

If you're an employee, your National Insurance contributions are deducted from your wages before you receive your salary. Your contributions are reflected in your payslip.

If you're a limited company director, you may also be an employee (at your own company). As such, you pay Class 1 National Insurance through your PAYE payroll.

If you're self-employed, you pay Class 2 and Class 4 National Insurance depending on your profits. The majority of self-employed workers pay National Insurance through Self Assessment.

If you're employed and self-employed, your Class 1 National Insurance will be deducted through your wages. You may also need to pay Class 2 and Class 4 National Insurance depending on your self-employed profits.

• What is PAYE
• PAYE when self employed
• When to register for PAYE
• Sole trader taxes
• Sole trader income tax calculations
• Limited company dividends & salary
• Dividend tax rates

What is income tax?

Income tax is a tax imposed on the income or profits made by individuals in any given tax year. While this is typically deducted at source for employees, self-employed persons pay income tax differently and may be taxed a different amount.

What is the current self-employed income tax rate?

Income tax rates for the 2019/20 tax year are as follows:

• Personal Allowance: Up to £12,500 (0%)
• Basic rate: £12,501 to £50,000 (20%)
• Higher rate: £50,001 to £150,000 (40%)
• Additional rate: over £150,000 (45%)
  

If you need more information on Personal Allowance and income tax rates for previous tax years, check out the following guides from HMRC:

• Personal Allowances
• Income tax rates and bands for previous tax years
  

Paying income tax as a self-employed person: What you need to know

Unlike employees, self-employed individuals don't pay income tax through PAYE-they're required to file an annual Self-Assessment tax return.

Most people file their returns online these days. The deadline for doing so is 31st January, while payments for your tax bill are due on 31st January after the end of the relevant tax year. That means that your 2018/19 tax year must be paid up by 31st January 2020.

If you're newly self-employed, you'll need to register for Self-Assessment. Keep in mind to stay within the deadline, as there are penalties for registering your Self-Assessment late. We explain more about key deadlines, as well as late filing and payment penalties in our Self-Assessment guide.

Resources:

• Income tax rates and Personal Allowances
• Checking your Income Tax for the current year
• Tax codes
• Self Assessment Tax Returns: A beginner's guide for the self-employed
• Understanding the P60: What is a P60 form, and what do you need to know?
• PAYE forms

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