Ltd Vs Umbrella take home monies

[TheFaQQer]

Call me a skeptic, but this sounds like the "tease" Anyway, if this is a real post and your colleague is using an avoidance scheme, forget about it, that income is provisional (i.e. heading to HMRC before long). If you're concerned about money, take a larger dividend FFS; you can't be "tax efficient" and take a high income.

<pedant>You can be tax efficient and have a high income. What you can't do is be tax efficient, have a high income, and be legal</pedant>

[jamesbrown]

<pedant>You can be tax efficient and have a high income. What you can't do is be tax efficient, have a high income, and be legal</pedant>

Surely tax efficiency is measured by success? You can have the illusion of tax efficiency with a high income. If it isn't measured by success, you can have 100% tax efficiency at all levels of income.

[PerfectStorm]

Ltd Vs Umbrella take home monies

Golden bit of advice from here - "take the money (and tax) if you need it, not when you don't". So if you can live on the 42385 a year (inc 10600 salary), which is roughly equivalent to a £60k pa job, then do that, if you need the extra (for a house or something) then take it as and when. If not, roll it over and take it in the new tax year in mid April.

That's still reasonably tax efficient. A tax deferred is a tax saved, and you'll kick yourself next year if you're out of work and you could've used your annual limit to get the money for free rather than paying 22% tax on it.

[Blakes03]

Guys, thank you all for the good advice, really much appreciated and very good comments as always from this forum.
Yes, there is more to life than being tax efficient, I too could buy myself a flash car, but to be frank, that is not me.

I have noticed the money banking up in the company account, of course I have but my feeling is that I will let that build up for a rainy day in the future and when not working I will be able to carry on paying myself a tax efficient income from it. I am taking into account all the usual points covered in multiple threads here and what my accountant tells me when he can be bothered to reply to my emails!

To summarise and I know it is covered in multiple threads but my theory is the £672 a month is the PAYE (x12 = £8064) which means I am not going to be paying NI or tax on my salary, nor is my company going to be paying NI but it is enough for NI rights and Pension stuff to be maintained.

The annual dividend payment is £28,606 which takes into account Nominal Tax Credit to bring it up to the full amount of £31,784. £28,606 dividend by 12 months is £2,383 therefore annually paying 10% tax on my Dividend take home total in January on the Self Assessment. This gives an annual total income from the company of £39,848 of which one only needs to pay 10% on £31,784 for the Self Assessment.

I can easily live on this as I also have a private income which for years I have obviously being paying 40% on. With a company income of £39,848, this gives me £2,537 at 20% and then anything over £42,385 at 40%.
That is my theory but I could be wrong. I certainly think Nominal Tax Credit is wrong but that is another thread I am sure.

My mate who is swimming in cash, like every night a Saturday night is on the same day rate through an Umbrella!!! Yes I agree 100% with you My FAQQER, the maths don’t add up but I can assure you this is what his take home is. I have questioned it but he is not really sure how it all works and does not care and uses the Umbrella method because he can’t be bothered with all the home admin and hassle that goes with a Ltd as he puts it!! As a result he gets a massive take home with no hassle and that is the way he likes it. One thing he has mentioned is that as we are in Central London, his travel is taken into account. Really!!! No Mr Brown, this is not a tease, I do not understand it, I am very curious and that is why I am posting this question.

Again, many thanks to you all for your comments

[mudskipper]

42385 / 12 = £3532

Net dividend of £28596 = gross dividend of £31773 + £8064 = £39873

OP's accountant should be able to explain how they've got to the figures (bearing in mind if OP has been going a couple of months it was previous tax year, and they probably had permie income prior to that so paying tax/NI on salary)

[cojak]

Call me a skeptic, but this sounds like the "tease" Anyway, if this is a real post and your colleague is using an avoidance scheme, forget about it, that income is provisional (i.e. heading to HMRC before long). If you're concerned about money, take a larger dividend FFS; you can't be "tax efficient" and take a high income.

If it is I'll ban his sorry ass and tell everyone why.

[cojak]

My mate who is swimming in cash, like every night a Saturday night is on the same day rate through an Umbrella!!! Yes I agree 100% with you My FAQQER, the maths don’t add up but I can assure you this is what his take home is. I have questioned it but he is not really sure how it all works and does not care and uses the Umbrella method because he can’t be bothered with all the home admin and hassle that goes with a Ltd as he puts it!! As a result he gets a massive take home with no hassle and that is the way he likes it. One thing he has mentioned is that as we are in Central London, his travel is taken into account. Really!!! No Mr Brown, this is not a tease, I do not understand it, I am very curious and that is why I am posting this question.

Again, many thanks to you all for your comments

You don't understand it? How many times and in what other way can we make you understand??

The FAQqer explained how, but I will put it simply for you. Your mate has joined an 'bad' umbrella scheme (as an employee) that is encouraging him not to pay the tax that you are paying. HMRC WILL FIND OUT AND BANKRUPT YOUR FRIEND FOR MORE MONEY THAN HE EARNED DURING THE CONTRACT.

Is that any clearer?

[cojak]

PS.
And if you name the umbrella on here I WILL ban you.

HTH.

[PerfectStorm]

If you're on an 8064 salary then you're getting bad advice. It should be 10600

[Blakes03]

OMG - Cojak, you are right I don’t understand it as this chap is convinced it is all above board and therefore I too was convinced hence asking the question. You and the FAQQer have clearly told me that this is not possible - thank you.

Also – I do not know the name of the company, I shall not pursue the query any further.