This has been touched on before but surely HMRC won't accept a Consultant with his Ltd Co claiming a salary as low as £5K with the rest as Dividends - don't they look at what is 'realistic' for the profession? Surely a salary of around £25K is deemed more acceptable?
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Your owning your own company. Why would you want a "realistic" salary. A realistic salary for a company director can be anything upto £150 million. -
There is a school of thought that a real-world salary makes you less likely to get investigated, on the basis you are trying to play fair and the tax recovered would be a lot less anyway. There is, however, no real justification for that view. I do know of people who pay real salaries because they feel it's the right thing to do (that very English concept) but it's your decision at the end of the day.Originally posted by KennyG
My (completely unjustified and unproven!) feeling is that what might trigger an investigation is a sudden change in your salary structure, so it's probably best to make your mind up which way you want to go and stick with it.
Also worth noting a couple of accountants reccommend a salary of at least NMW - say £10k - just in case any new rules come along that use NMW as the cutoff point.Blog? What blog...?
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HMRC doen't have to accept it.Originally posted by KennyG
That's for the courts to decide.
timComment
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Some IR35 insurers insist on NMW....my quagmire of greed....my cesspit of laziness and unfairness....all I am doing is sticking two fingers up at nurses, doctors and other hard working employed professionals...
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How long is your current contract for? Can you be certain that you will get another one without delay when it finishes?Originally posted by KennyG
The way I see it is that my company cannot be certain that it would be able to pay a 'realistic' salary in the event of a shortage of contract work, therefore it would be irresponsible to pay it.
That's my view, I have not asked an accountant.Comment
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I agree. Paying yourself as little as possible is putting the business first. I choose to work for a much lower salary than I would expect as an employee because I want the business to succeed long term and keep meeting it's costs even if it can't find paying work (and if there happens to be a surplus then that's nice).Originally posted by Gonzo
I think like that because I'm really in business. A psuedo-employee would just pay themselves as much as they could in the most tax efficient method possible, and not worry about planning ahead.Will work inside IR35. Or for food.Comment
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Is there any law to prevent you from drawing down dividends only?Comment
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Nope, but you should at least take the 0% tax band of around £5k or you're just wasting money.Blog? What blog...?Comment
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This is a common area of debate. I am drawing a slightly higher salary based on feedback from my accountant however I am limiting myself to ensure I dont pay high rate tax.
My initial issue was always how to ensure I drew enough funds to cover my personal outgoings. I can always draw the NMW AND a dividend each month but this feels messy. The additional challange now is how to chnage what I draw without attracting attention. I guess I could reduce my salary month by month.
How did other people handle it? Start by drawing a huge dividend to cover the next 3 months (say) or did everyone have enough saved up initially?Comment
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