Starting limited company with existing PAYE earnings from previous job
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    Nervous Newbie


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    Default Starting limited company with existing PAYE earnings from previous job

    I started my first contract in September and have just received my first invoice payment, phew!

    My earnings from permanent job salaries since April this year come to 26.5k, and for some reason my tax code was changed earlier in the year down to 108T which means I have hardly any tax free income.

    My question is whether I should/can just pay myself in dividends for the rest of this tax year as I'm already well over the amount where there's no income tax & nics to pay. All the info I can find on salary vs dividends talk about finding the right balance and assume no previous salary income for the year.

    I don't yet have an accountant, and I'm not even sure I really need one as I like to handle numbers myself. I'm not sure if I'm being incredibly naive thinking I can manage without one.

    Any insight welcome.

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    Fingers like lightning


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    Get an accountant now. Mistakes that you make now can become very expensive and skimping out now is a false economy. As much as you may like handling numbers, it is unlikely that you know the intricacies of tax law.

    Welcome to contracting

  3. #3

    Midland White

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    Quote Originally Posted by uncleringo View Post
    I started my first contract in September and have just received my first invoice payment, phew!

    My earnings from permanent job salaries since April this year come to 26.5k, and for some reason my tax code was changed earlier in the year down to 108T which means I have hardly any tax free income.

    My question is whether I should/can just pay myself in dividends for the rest of this tax year as I'm already well over the amount where there's no income tax & nics to pay. All the info I can find on salary vs dividends talk about finding the right balance and assume no previous salary income for the year.

    I don't yet have an accountant, and I'm not even sure I really need one as I like to handle numbers myself. I'm not sure if I'm being incredibly naive thinking I can manage without one.

    Any insight welcome.
    QED. Get yourself an accountant.

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    Quote Originally Posted by Midland White View Post
    QED. Get yourself an accountant.
    What he said.

    Reading your post it's clear you're at best hazy over what to do and in reality I'd say you effectively have no idea, to me that says an accountant is a must for your situation.

  5. #5

    Contractor Among Contractors


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    Default Starting limited company with existing PAYE earnings from previous job

    A little knowledge can be dangerous. IME, start up contractors who think they can handle their accounts themselves very often come unstuck. You need to consider now:

    1/ your vat position. Should you register? Should you get on VFRS?

    2/ salary level. How much? Should you pay any at all this tax year? (Prob not IMO)

    3/ dividends. Get the paperwork right.

    4/ are you in or out IR35? Not strictly an accountant question but guidance is normally available.

    5/ travelling expenses. 24 month rule amongst others.

    There's more to consider but that's why you need an accountant. Clearly I'm biased but most contractors will tell you the same.

    You also need to consider book-keeping and record keeping.

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    Thanks for the replies guys

    1. I am vat registered because I'm over the threshold, and I'm on the flat rate scheme as it works best for my situation.

    2. Exactly my question. Unless there's a good reason for paying myself a salary that I don't know about then I won't. The minimum NICs for a state pension won't apply according to new rules coming in.

    3. I am aware of the required paperwork for issuing dividends.

    4. Ditto IR35

    5. Ditto 24 month rule

    I obviously didn't do a good job writing my post as everyone has assumed I don't know anything about accounting.

    I probably will appoint an accountant, at least for my first year, but I also try to learn as much about these things as possible myself. I gather most contractors don't want to have to think about the tax side of things, but the geek in me finds it very interesting.

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    Contractor Among Contractors


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    Fair enough. In answer to the salary / divi question: yes, you can pay only divis for the rest of this year. There was a thread this week about this exact subject.

    The day-to-day stuff you van probably handle but the year end may be a bit of a challenge. But the tax planning is where we accountants earn our corn. As is mentioned here regularly a good accountant is not a cost - they should always add to your bottom line.

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    LOL! Another of the 'I want to save 1400 quid out of my 81000+ turnover' types.

    I dont know why people do it. Pay an accountant and use your spare time to do something productive rather than spend the free hours doing your books.
    I couldn't give two fornicators! Yes, really!

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    More time posting than coding

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    Quote Originally Posted by BolshieBastard View Post
    LOL! Another of the 'I want to save 1400 quid out of my 81000+ turnover' types.

    I dont know why people do it. Pay an accountant and use your spare time to do something productive rather than spend the free hours doing your books.
    +1 on this.
    Clarity is everything

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    Quote Originally Posted by BolshieBastard View Post
    LOL! Another of the 'I want to save 1400 quid out of my 81000+ turnover' types.

    I dont know why people do it. Pay an accountant and use your spare time to do something productive rather than spend the free hours doing your books.
    That's pretty much why I use an accountancy firm. I'm capable of doing the books myself, but I've no inclination to do so plus I prefer to have advice on tap than to do the research.

    I see it as value for money.

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