Proprietary director - PAYE or Self Assessment?

I

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Could someone please answer this question, myself and a friend had differing opinions during a discussion on this matter.

My understanding of how a proprietary director pays income tax is that they are taxed as an employee under Schedule E in respect of any earnings taken from the company. They are liable to self assessment on their income in the same way as the self employed, however as they pay PAYE on their earnings received by the company, self assessment will only apply to any non-PAYE income eg rental or investment income.

My friend thinks that they are not liable for PAYE but pay the tax solely under the self assessment system.

can anyone clear up?

Many thanks
 
If the company pays out salary to a PD then Paye must be operated at the time of payment.
 
If you are a proprietary director you must file a tax return. You must declare ALL income (from all sources) on this return.
 
Point about the Tax Return is correct;

Applying PAYE is also correct.

Also bear in mind that a Proprietray Director can set up a slef directed trust of pension purposes, to which the company can make payments ..

That is a most efficient way of extraction !
 
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