When you are paying yourself from your own company it may seem like the right thing to do is to only pay yourself when the company has excess resources, particularly in the early days of your business when cash can be tight.
It is advisable, however, to pay yourself a regular salary from the very start, no matter how small, for a number of reasons some of which are as follows:
- It ensures that you are making PRSI contributions which are important when it comes to claiming certain benefits from social welfare like your state pension for example.
- If you eventually look to sell your company down the track tax reliefs like Retirement Relief and Entrepreneur Relief state that these reliefs are only available to those who are working directors of the company. Being able to point to a regular salary payment can help to prove that you meet this test.
- We also saw during the COVID-19 pandemic that the wage subsidies available to directors and other employees could only be claimed if they were being paid regularly from the company.
If you are paying yourself a relatively small salary on a regular basis in order to conserve cash then it is perfectly ok to pay yourself a lump sum/bonus during the year if the cash reserves allow.
You can just process the additional payment through payroll in the period that you would like to receive the additional payment.
Learn more about to get paid as a director here
Date published 19 May 2021 | Last updated 19 May 2021This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.