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What's the minimum salary I can pay myself?

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    #11
    Originally posted by glashIFA@Paramount
    In 07/08 the Lower Earnings Limit is £87 pw which will qualify you for a state pension. However, this level of salary will also qulaify you for a State Second Pension (S2P, formerly SERPS) and the rebate for this will be based on assumed earnings of £13,000 so it's a bit of a freebie really. So you can avoid NI but still qualify for OAP and S2P.
    What's your take on contracting out of SERPS?
    How fortunate for governments that the people they administer don't think

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      #12
      Originally posted by Troll
      What's your take on contracting out of SERPS?
      You mean S2P

      Pension companies will advise you stay in as you are likely to get more money as things stand. The only question is do you trust the government to not change the rules ?!

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        #13
        Originally posted by Lewis
        You mean S2P

        Pension companies will advise you stay in as you are likely to get more money as things stand. The only question is do you trust the government to not change the rules ?!
        Always wary of authorities changing names ... usually it's to mask something bad.
        and no I do not trust the government - that is the problem
        How fortunate for governments that the people they administer don't think

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          #14
          Originally posted by Troll
          What's your take on contracting out of SERPS?
          Exactly as Lewis says, there is no right or wrong. It's a political versus investment decision. If you trust this, and future governments to keep their pledge to state benefits, none of which are g'teed, then stay contracted in. If you think you can do better investment wise with the rebate, then contract out. When it was SERPS the pension providers all gave advice, salary, age etc. but the rebate calculation is a lot harder to quantify now so they are all sitting on the fence. Telling you to contract back in if you're out, or stay in if you're not out is the safe option and from their point of view it's better than waiting for another pension mis-selling scenario to go through again.

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            #15
            By the way you can take the best part of the next year to read up and decide. As you can backdate a rebate to the start of the tax year.

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              #16
              I'm glad this thread is here, I was going to start something similar.

              I'm currently having the same issue with my accountant. He has recommended that I pay myself 10,500 a year which keeps me above minimum wage. That's a monthly payment of 750.

              That was all fine with me until I just got my PAYE bill for the quarter of around 300. So I lose 1200 a year by paying minimum wage, when I could have paid myself less and incurred no taxes at all.

              I asked him why - he said to keep HRMC happy. What I don't really get is I would be doing nothing legally wrong by paying myself less, so why should HRMC not be happy? How could it affect me?

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                #17
                Originally posted by Gros
                I'm glad this thread is here, I was going to start something similar.

                I'm currently having the same issue with my accountant. He has recommended that I pay myself 10,500 a year which keeps me above minimum wage. That's a monthly payment of 750.

                That was all fine with me until I just got my PAYE bill for the quarter of around 300. So I lose 1200 a year by paying minimum wage, when I could have paid myself less and incurred no taxes at all.

                I asked him why - he said to keep HRMC happy. What I don't really get is I would be doing nothing legally wrong by paying myself less, so why should HRMC not be happy? How could it affect me?
                This has been discussed before, but it'd take me a while to find the thread ... in summary, some (but certainly not all) professionals consider there to be an increased risk of investigation paying 5K vs 10K.

                But it was hotly debated some saying this is rubbish others saying not. QDOS requires a salary of around £10K to have their IR35 tax loss insurance, this is because they consider there to be more risk of investigation if you are paid less. As I have this insurance I have no choice.

                It's another one of those "you must decided for yourself" ones I'm afraid.

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                  #18
                  IIRC it's all about dividends being profit shares and not needed to live on.

                  If the HMRC suspect you are using your dividends to live on (pay bills, buy food etc) on a regular basis, they will then investigate you with a view to sending you a nice PAYE bill for what you took as dividends that they think you should have taken as salary.

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                    #19
                    Originally posted by beermeister
                    I am director of limited company and am currently contracting.

                    What's the minimum amount I can pay myself in salary? I guess £5100 if I want to stay in State Pension, but suppose I'm not interested in this?

                    This thread is very useful (and entertaining in places!)

                    http://forums.contractoruk.com/thread15020.html

                    Comment


                      #20
                      Originally posted by Burdock
                      This thread is very useful (and entertaining in places!)

                      http://forums.contractoruk.com/thread15020.html
                      What a fantastic thread, thanks for putting that up. There is far more info there than I could find elsewhere on the net, and it's mostly balanced views from a range of perspectives. Perfect.

                      I have now decided that, considering:
                      a) I am new to contracting (ie, I don't have many years of money to care about)
                      b) My contracts are said to be outside IR35 and mostly short term (1-3 months)
                      c) Even if I was investigated, I wouldn't have all that much to lose

                      ...that I will ignore my accountants advice and go with the minimum salary option.

                      What is that now, £100 per week? It seemed to have changed over the course of that thread.

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