• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

P45 and Tax. Permanent > Contract mid-Fiscal Year.

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    P45 and Tax. Permanent > Contract mid-Fiscal Year.

    Hi Guys,

    I have tried searching the forum but either my Search abilities are useless (highly likely) or it's not been asked before (highly unlikely) so I apologise in advance.

    Yesterday was my last day with my Perm employer, and now I work for myself . LtdCo all setup and start a new contract on Monday, through an Agency.

    I have received my P45 from my old employer, do I have to fill in Part 3 (New Employee Details, for Completion by new Employer)? And register as an employee as my new Ltd Co?

    Also with regards my Personal Allowance, I have already well exceeded that and am in fact in the higher tax band already this year, what is the best way of handling this for my new company, am I just going to have to take the hit on my wage (Currently set to ~£7500pa) and pay the additional 25% on my Dividends until it's all reset in April?

    Any other hints, tips, tricks or advice always welcome! I am currently in sponge mode trying to soak everything in!

    Thanks
    Chris
    There are 10 types of people in the world, those who understand binary and those who do not.

    #2
    Originally posted by topper View Post
    Hi Guys,

    I have tried searching the forum but either my Search abilities are useless (highly likely) or it's not been asked before (highly unlikely) so I apologise in advance.

    Yesterday was my last day with my Perm employer, and now I work for myself . LtdCo all setup and start a new contract on Monday, through an Agency.

    I have received my P45 from my old employer, do I have to fill in Part 3 (New Employee Details, for Completion by new Employer)? And register as an employee as my new Ltd Co?

    Also with regards my Personal Allowance, I have already well exceeded that and am in fact in the higher tax band already this year, what is the best way of handling this for my new company, am I just going to have to take the hit on my wage (Currently set to ~£7500pa) and pay the additional 25% on my Dividends until it's all reset in April?

    Any other hints, tips, tricks or advice always welcome! I am currently in sponge mode trying to soak everything in!

    Thanks
    Chris
    OK, I'll say it.

    You have got an accountant sorted out haven't you? You could try asking them.

    I expect that they would advise you that there is no value in taking any money as PAYE for the rest of this tax year but when the new tax year starts then it will be worthwhile running a payroll.

    The P45 won't be relevant then because they are used so that a new employer deducts the right amount of tax when you change employer mid tax year.

    Comment


      #3
      Yep, Gonzo has it about right. You could defer your PAYE registration until after 05 Apr 2012, and for tax planning flexibility, not pay yourself any salary or dividends until the new tax year arrives.

      And coming off a PAYE position with your income dropping to £0 for the last few months of the tax year, you should expect to get a nice personal tax refund back.
      2012 CUK Reader Awards - '...Capital City Accountancy, all of whom were outside the top three yet still won compliments from CUK readers for their services' - well, its not an award, but we'll take it! - Best Accountant (for IT contractors) category
      2011 CUK Reader Awards - Top 3 - Best Accountant (for IT contractors) category
      || Check us out at: http://www.linkedin.com/company/capi...ccountancy-ltd

      Comment


        #4
        Originally posted by topper View Post
        I have received my P45 from my old employer, do I have to fill in Part 3 (New Employee Details, for Completion by new Employer)? And register as an employee as my new Ltd Co?

        Also with regards my Personal Allowance, I have already well exceeded that and am in fact in the higher tax band already this year, what is the best way of handling this for my new company, am I just going to have to take the hit on my wage (Currently set to ~£7500pa) and pay the additional 25% on my Dividends until it's all reset in April?
        Hang on to your P45, you will need it if/when you eventually register for PAYE (assuming you haven't already).

        What others have said already.

        Depends if you can manage without the money for now. If so then just don't pay any salary or dividends and retain profit in the business instead, which can be paid later as salary + dividends as your personal allowance permits.

        If you need the money now, then pay out as dividends only and accept the tax hit.

        Either way, you already have your NI stamp this year from time as a permie so no need for salary/wages this tax year. But if/when you do then you will need to register for PAYE.

        You can also bung a lump sum as a company contribution into a personal pension (e.g. SIPP) and this would normally come out of profits thus saving on CT. You could do that this year if you want. This option isn't for everyone so get advice.

        Comment


          #5
          Originally posted by Gonzo View Post
          OK, I'll say it.

          You have got an accountant sorted out haven't you? You could try asking them.

          I expect that they would advise you that there is no value in taking any money as PAYE for the rest of this tax year but when the new tax year starts then it will be worthwhile running a payroll.

          The P45 won't be relevant then because they are used so that a new employer deducts the right amount of tax when you change employer mid tax year.
          Sorry, Yes accountant all sorted, and I did email them Saturday, just thought I would throw it out there, and shamelessly get my post count going.

          Thanks for the info, makes sense.
          There are 10 types of people in the world, those who understand binary and those who do not.

          Comment


            #6
            A very good question, I'm in the same boat.

            I have just asked my accountant for advice.

            I'll let you know what he says (unless he also posts on here to answer).

            Gaz

            Comment


              #7
              Originally posted by topper View Post
              Sorry, Yes accountant all sorted, and I did email them Saturday, just thought I would throw it out there, and shamelessly get my post count going.
              No worries.

              There are some on here that show little tolerance towards people asking questions that their Accountant would be able to answer in a second - the same questions pop up again and again and again. I was in a chilled out mood though.

              One thing that you will need to quickly get your head around is that now you are in control of when and how you pay yourself that gives you more opportunities to be tax efficient than you are used to.

              Accountants can vary - some will be very proactive and some will just answer the questions that you ask them. Others still will have done all the proactive thinking on your behalf and are just not very good at communicating that so you still have to ask.

              Comment


                #8
                Do not take any salary or dividends this tax year. If you need money, take directors loan.

                Additionally, do your self assessment tax return for 2011-12 as soon as possible so you get overpaid tax refunded early.

                Comment


                  #9
                  Originally posted by Kugel View Post
                  If you need money, take directors loan.
                  Think carefully before using the Directors Loan Account and take advice if necessary.

                  I was always one for overdrawing the DLA at the end of the tax year if I wanted to withdraw some more cash from my company but it should be noted that this does not save any tax, it just defers it until the following tax year.

                  Whether this will make you better or worse off will depend on whether tax rates are going up or down or if you are trying to skirt around the higher rate tax band. Watch out for the pitfalls too!

                  Comment


                    #10
                    I think you do need to speak to your accountant before you do anything, getting the right salary can save you quite a bit of cash, also be wary of loans etc as this can get messy.
                    "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero

                    Comment

                    Working...
                    X