My husband and I are both self employed. We pay our incomes into the same limited company. We are both directors of that company. Our accountant advised us to both pay ourselves in dividends from the company as it is more tax efficient. But now we are not eligible for tax free childcare or the 30 hours childcare and are worried about the implications for maternity pay. Is there anything we can do?
I would suggest that you register your company for PAYE immediately and backdates your PAYE start to the beginning of this tax year. In any event you can amend your 2016/17 tax return up to the point when the tax is due (31st Jan 2018).
There are no costs to registering and payroll software such as Payroo is free.
The PAYE registration can be done online via a from to be completed and submitted electronically. The only problem I can see is that it might take a couple of weeks to get the PAYE reference numbers etc through from HMRC.
You will not pay more tax if you just pay yourself a minimum salary and there will be no tax if you are simply using up the £8,060 Tax and NI Free allowance that everyone has. £8,060 is £155 per week which means that you qualify for tax free child care and maternity pay [dividends don’t qualify as earnings for maternity pay].
The moral of this is for women to always be paid some of their income as salary. Salary attracts National Insurance, which even if you are exempt from paying it, qualifies you for maternity pay. Dividends attract no National Insurance which is why so many pay themselves that way.