Salary when already over threshold

[paulc]

Hi

I am currently in the process of trying to setup payrole however I am not sure how much I should be paying myself as I am already a bit over the 7k threshold from my previous full time employment that ended in June of this year when I setup.

I obviously wish to be as tax efficient as possible so wonder if it is possible to just not pay myself a salary for the rest of this tax year? Though I have been advised that it is best to pay a salary my understanding thus far is this is for corp tax (in increasing overall expenditures) and NI reasons.

Any advice and clearification is much appreciated on this.

Thanks,

P

[Craig@Clarity]

Hi Paul,

Paying yourself a further salary from you company isn't going to really change how much you hand over to HMRC in tax. You would either pay corporation tax at 20% on the profit or if you take out a salary e.g. another £7,000 , you reduce your profit by this much and thus reduce the amount of corporation tax by £1,400 (£7,000 x 20%). However, in this example you'll be paying income tax at 20% (£1,400) assuming you're not a higher rate tax payer.

So, the real consideration in your case which will be the difference you pay in NIC.

[northernladuk]

Similar questions asked here. See if it helps...

http://forums.contractoruk.com/accou...gh-tax-yr.html

http://forums.contractoruk.com/accou...-much-tax.html

[paulc]

Thanks

Hi Guys,

Thanks very much for the advice this is very much appreciated.

Cheers,

Paul

[tractor]

..

Hi

I am currently in the process of trying to setup payrole however I am not sure how much I should be paying myself as I am already a bit over the 7k threshold from my previous full time employment that ended in June of this year when I setup.

I obviously wish to be as tax efficient as possible so wonder if it is possible to just avoid paying myself a salary for the rest of this tax year? Though I have been advised that it is best to pay a salary my understanding thus far is this is for corp tax (in increasing overall expenditures) and NI reasons.

Any advice and clearification is much appreciated on this.

Thanks,

P

What they said.

Additionally you should avoid using the word 'avoid' when talking tax.

[northernladuk]

What they said.

Additionally you should avoid using the word 'avoid' when talking tax.

Nothing particularly wrong with it. It is evasion you wan't to avoid..

These include tax avoidance, which refers to reducing taxes by legal means, and tax evasion which refers to the criminal non-payment of tax liabilities

[paulc]

Thanks for the advice guys. It is much appreciated.

PS: Original post edited as suggested.

[tractor]

Nothing particularly wrong with it. It is evasion you wan't to avoid..

"These include tax avoidance, which refers to reducing taxes by legal means,"

I agree but the last government viewed 'avoid' as illegal and legislated accordingly. IIRC all brought about initially by a minister reading the infamous 'make hay' article.

'Plan' is a much better word IMHO.

[psychocandy]

Hi

I am currently in the process of trying to setup payrole however I am not sure how much I should be paying myself as I am already a bit over the 7k threshold from my previous full time employment that ended in June of this year when I setup.

I obviously wish to be as tax efficient as possible so wonder if it is possible to just not pay myself a salary for the rest of this tax year? Though I have been advised that it is best to pay a salary my understanding thus far is this is for corp tax (in increasing overall expenditures) and NI reasons.

Any advice and clearification is much appreciated on this.

Thanks,

P

I'm in that suituation too. Not paying myself any salary this year from my company because I've already earned way over £7K from permie employment. Like someone else said, you'll just end up paying more NI if you pay a salary now.

[Hex]

I'm in that suituation too. Not paying myself any salary this year from my company because I've already earned way over £7K from permie employment. Like someone else said, you'll just end up paying more NI if you pay a salary now.

You might want to check that with your accountant. My understanding is that NI is calculated independantly for each employment. So your new company allows you to pay yourself a salary and use a new set of NI allowances. If I'm right (and I think I am) then you can pay yourself 7K from your company in this tax year and pay no NI. You'll have to pay income tax on it as you've used your personal allowance on your previous employment.