Tax efficient salary for 2015/16

[Olly]

Remember there's a 10% savings rate (moving to 0% from April 6), so you're unlikely to pay (much) interest on savings income if you're paying a salary around your personal allowance.

...but isn't that 0% on savings only relevant if total income falls below the £15,500 threshold?

Both salary rates in this thread obviously do but add on dividends up the 40% bracket and we're over £15,500

[Sausage Surprise]

Extra £140 for running employee payroll - it was waived last year but will be charged this year. It's included in the 'plus' package.
Pricing - Crunch

This is the recommendation from them "I have been looking in to this in more detail and due to the the changes in the bands this year it is not more tax efficient to take more than £8060."

I only have myself on the payroll and that is included in the standard package. You must have more than one person on the payroll to be charged extra is the way I read it.

[Sausage Surprise]

Well, they're wrong, assuming you have a normal tax code and YourCo is eligible for the Employment Allowance. I have no direct experience of Crunch but, generally speaking, you get what you pay for, and I think that's mainly software with Crunch(?)

You don't pay extra for payroll if there's just a director on the payroll.

[jamesbrown]

...but isn't that 0% on savings only relevant if total income falls below the £15,500 threshold?

Both salary rates in this thread obviously do but add on dividends up the 40% bracket and we're over £15,500

The ordering rules are such that dividends are taxed after interest from savings:

Income Tax Act 2007 - Explanatory Notes

[Smartie]

You don't pay extra for payroll if there's just a director on the payroll.

Yes you do if you want to use the employment allowance. Ask them.

[7specialgems]

I try to extend my working practices to the way I run my limited.

In light of the £10kp.a I paid myself last year and the CPI of 0% announced on 24/03, I am planning to continue to pay myself £10k.p.a for the forthcoming year.

Maybe I'm paranoid, but since I only ever take up to the ceiling amount in dividend draw and I would still be making a final quarter PAYE return, if I ever got the knock on the door I figure I could point to this as an indicator of good company stewardship.

Whilst on the personal side it would be far more advantageous to take the full personal allowance, I'd find it difficult to justify a 5-6% performance related increase up to £10,600pa given that the last two year's turnover for me were broadly similar.

[Willapp]

Wow this thread has me more confused than ever! Why can't everyone agree on one figure? lol

I realise there are slightly different circumstances for some contractors, but assuming the typical case (no savings interest or other income etc) what is the recommended monthly salary? Is £10,600 / 12 = £883 correct?

I will check with my accountant anyway but it just seems strange to have even accountants disagree as to what is "best" for most people.

[Maslins]

I will check with my accountant anyway but it just seems strange to have even accountants disagree as to what is "best" for most people.

FWIW our view is:
- £671/month = easy option.
- £883/month = most tax efficient option.
We tend to recommend the former, as whilst it does in most circumstances mean paying a very modest amount more tax than the latter, it keeps things simple, gross pay = net pay, PAYE/NICs is a tax that can be completely forgotten about (though of course RTI submissions are still required).

[ASB]

True, as said it feels unwise to issue dividends in a salary type manner, it just invites hassle from HMRC. I tend to issue a big one at the end of the tax year, in fact I've just paid it.

Next tax year I'm probably going with the £10,600 salary as the accountants have explained.

how can it possibly invite hassle?

By the time hmrc are aware then you have got the hassle. It cannot be causal.

[Willapp]

FWIW our view is:
- £671/month = easy option.
- £883/month = most tax efficient option.
We tend to recommend the former, as whilst it does in most circumstances mean paying a very modest amount more tax than the latter, it keeps things simple, gross pay = net pay, PAYE/NICs is a tax that can be completely forgotten about (though of course RTI submissions are still required).

But I thought you wouldn't incur any PAYE if the new allowance is £10.6k? Is it purely NICs that complicate the situation?

I do tend to prefer the "easy" options but at the same time, +£200 per month in tax free salary is not nothing...