How much to pay onesself

[MrButton]

Hi. It really sounds like you have very poor accountant.

Based on the links provided maybe he’s gone with one of those accountants - “Cheaper Accountant” or “Cheap Accounting”

Not saying cheap isn’t good. It’s just not the first thing to look for.

[craigy1874]

Their prices are insanely low!

[Wazcov]

Based on the links provided maybe he’s gone with one of those accountants - “Cheaper Accountant” or “Cheap Accounting”

Not saying cheap isn’t good. It’s just not the first thing to look for.

Not at all, it's a high street accountancy, I think national. Their website certainly says "40 UK Chartered Accountancy firm"

[TheCyclingProgrammer]

The best options for 2018/19 are all laid out here:
https://jf-financial.co.uk/2018/01/0...dends-2018-19/

[pscont]

I can top up to my personal allowance of £11,850 by adding £3,426 but I'll pay 7.5% dividend tax and 12% NI on that extra £5,426 (2k dividend not included in taxable income).

I think you are wrong here. If you add this ~£3400 of dividend (over the £2000 divi tax free) you wont pay 7.5% divi tax due to you still being under £11850. You also wont pay 12% NI on it because it is divi.

Some one to correct me if I am wrong about the above.

[t0bytoo]

The best options for 2018/19 are all laid out here:
https://jf-financial.co.uk/2018/01/0...dends-2018-19/

Very nice of them to sketch it out so clearly :-)

[chopper]

Hi All

Assuming your tax affairs are 'normal'... (If you have other sources of income, e.g. a rental property, another job, whatever, then the figures are different. In 2018/19 do this:

Basic salary of £11,850. This is tax free, a small amount of employers and employee's NI contributions will be due. This is used to reduce YourCo's profits, and thus reduce the Corporation Tax bill.

Then a dividend of up to £33,150. The first £2,000 of this will be tax free. The rest is taxed at 7.5%. So about £2340 in tax to pay in your Self Assessment return. Stash this *plus 50% more* in a savings account, use it to pay your tax (in January 2020!) plus there will be a 'payment on account' due for 2019/20 due at the same time. Dividends are after corporation tax, so they do not reduce the taxable profit of the business.

This is why paying NI on salary can be better than the lower tax rate of the dividend - because of the corporation tax situation.


If you need more money than that, don't let the tax tail wag the expenditure dog. Take a bit more out, pay a bit more tax. But it gets stupid if you have kids and you take out more than £50,000.

But try not to take out less than £45,000, because yes you have to pay the tax, but the 7.5% tax is a damn sight better than having to pay a higher tax rate further down the line.

You can't keep liquidating your company every year. This is specifically against the rules, the taxman will see right through it. This only works if you liquidate and then don't set up again for at least two years after.

If your day rate allows it, whilst also building up a warchest, then pay some money from YourCo into a SIPP, e.g. one from Hargreaves Lansdown | ISAs, pensions, funds and shares . This is (currently) a pretty tax efficient way of transferring money out of YourCo. If you put £10,000 into a SIPP from YourCo, there is no personal tax implication (at least until it is time to withdraw your pension), but it will reduce your Corporation Tax by £1,900. So £10,000 in your pension for the price of £8,100.

In the early days of contracting though, building up a warchest is more important.

As for mortgages, either go to Halifax or Post Office, maybe Natwest (depends on your contract) as they are reasonably contractor friendly and will accept your day rate (something like day rate multiplied by 240 as your annual income) if you have a decent work history and a decent contract in place. If that makes you nervous then use a contractor specialist mortgage provider ("Contractor Mortgages Made Easy" to name one, but this is not a recommendation. I've always sorted my own out. Try LMGTFY )

As for accountants, you are doing yourself a disservice if you take any old random high street accountancy. Don't think you need one in your local town. Use a contractor specialist accountant. Try Gorilla Accounting (mine) but there are many.


But back to tax. Don't think about how you can pay zero tax. That is simply kicking a massive tax can down the road.