Basic Salary of £5,000?

[Lockhouse]

I've been paying 5K a year for ever (and I've been investigated). I'm using TLC 35 for my next contract and QDOS apparently insist that NMW be paid, so I'm upping it to 10K.

[IR35 Avoider]

I've nearly always paid 5K (or whatever the personal allowance was at the time) except when forced to do otherwise by IR35. Now that pension contributions are unlimited, I use them to nullify IR35 liability and pay salary of 5K. I've been contracting since 1988 and never had any complaints from HMRC about this.

As far as I remember, contractor accountants have said that in their experience paying a low salary makes no difference to your probability of being investigated.

I've treated all contract income I've received via my own company as IR35-caught, so I'm not worried about an IR35 investigation.

[malvolio]

...
I've nearly always paid 5K (or whatever the personal allowance was at the time) except when forced to do otherwise by IR35. Now that pension contributions are unlimited, I use them to nullify IR35 liability and pay salary of 5K.

I've treated all contract income I've received via my own company as IR35-caught, so I'm not worried about an IR35 investigation.

Say what? How do you equate those two statements then?

[expat]

.....
I've treated all contract income I've received via my own company as IR35-caught, so I'm not worried about an IR35 investigation.

How interesting, given your nom de guerre. I don't mean to pry, but does that mean that you have other income not received via your own company, which you treat as not IR35-caught? so it would not be salary, then?

[IR35 Avoider]

Even if i lowered my salary by £5,000 wouldnt that leave £5,000 extra in the profit which would be taxed at 19% (Corp Tax)?

Yes, but remember that salary above the starting rate band (i.e. after roughly the first 7K) has a marginal tax burden of about 41%, if I remember correctly from the last time I calculated it.

I did a quick check on one of my spreadsheets and raising my salary from £5040 to 10K would increase my net tax burden from £2 to £1466. The spreadsheet assumes income not taken as salary is taken as pension, so corporation tax is not affected by the change. If it was, the difference would be £946 smaller. (In the spreadsheet, the contracted out rebate on NI contributions nullifies the corporation tax on the 5% not taken as salary or pension, reducing net tax burden to near zero.)

[IR35 Avoider]

How interesting, given your nom de guerre. I don't mean to pry, but does that mean that you have other income not received via your own company, which you treat as not IR35-caught? so it would not be salary, then?

My name is from the early days of IR35, I'm no longer "avoiding", unless you count working less and paying large pension contributions as avoiding.

[malvolio]

Yes, but remember that salary above the starting rate band (i.e. after roughly the first 7K) has a marginal tax burden of about 41%, if I remember correctly from the last time I calculated it.

I did a quick check on one of my spreadsheets and raising my salary from £5040 to 10K would increase my tax net burden from £2 to £1466. The spreadsheet assumes income not taken as salary is taken as pension, so corporation tax is not affected by the change. If it was, the difference would be £946 smaller. (In the spreadsheet, the contracted out rebate on NI contributions nullifies the corporation tax on the 5% not taken as salary or pension, reducing net tax burden to near zero.)

And who pays the milkman then? You can't live on a pension fund - at least, not legally.

[expat]

My name is from the early days of IR35, I'm no longer "avoiding", unless you count working less and paying large pension contributions as avoiding.

Fair enough. I'm "expat" but I'm currently living in the UK.

[IR35 Avoider]

And who pays the milkman then? You can't live on a pension fund - at least, not legally.

Mortgage effectively paid off, I can afford to take 10K a year in investment income without depleting capital, since 2003 wife has deigned to contribute 10K a year to household finances, and of course I'm still getting 5K a year in salary.

My annual spending budget is 15K plus whatever I spend on holidays, and I could cut the 15k to less than 12K if I got rid of my car, which I wouldn't really need if I wasn't working.

[Cactus]

Yes the extra profit would be subject to tax buit we advise to at least take the minimum wage, which as £5.35 per hour work out at around £10,000

Alan

Am I right in thinking that If my salary is £10k then the rest can be taken in dividends without any further tax to pay (i.e 19% Corp Tax) providing I'm below the £38,300? (I think that it £38,300 this Tax Year?).