What are Smart User Payments?
Smart User Payments let you pay yourself salary and expense reimbursements and will create dividend vouchers for the remainder.
Smart User Payments are most useful if you're running a UK Limited Company.
Typically, when you are a sole director you end up paying yourself on some reasonable regular basis.
On any given day, there will be a certain amount of salary and expenses you 'owe yourself', based on your payslips and the out-of-pocket expenses you've incurred up to that date.
Instead of categorizing a payment to yourself as specifically salary, expenses or dividend, FreeAgent works out how much salary and expenses you owe yourself and deducts those from the payment. It then calls the rest a dividend (producing a dividend voucher you can download under Accounting > Reports > Dividend Vouchers). Obviously if you only paid yourself enough to cover salary and expenses, no dividend would be declared.
That means don't have to worry about having to keep track of the salary and expense balances, and just pay yourself a sensible amount.
Caveat - you'll of course need to ensure your profits justify the dividend portion otherwise it's an illegal one, so you should check the 'Distributable Reserves' on this year's Profit and Loss.
And of course officially you shouldn't retrospectively declare or alter dividends. You should create the smart user payment the same day as the actual transfer.
If you're a Sole Trader or Partnership, it's a bit simpler. You're probably not paying a salary and dividends are irrelevant, so what's left over after repaying your out-of-pocket expenses are just 'drawings'.
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