What's the minimum salary I can pay myself?

[Peter Loew]

Although the bottom line is that as a Director you can pay yourself whatever you like, if at all, the fact is if you do get investigated and the HMRC make the argument of how you can live on £100 per week, what will you say?

Nobody can live on that money and you will obviously rely on dividend. Given this argument the HMRC will (out)rightly accuse you of tax dodging.

Isn't this the realistic scenario? They obviously know all the tricks in the book and they know what to look for when you submit your figures at the end of the tax year. Should we not assume that they can detect such patterns and avoid them by paying ourselves at least the NMW?

P

[Jason D]

Although the bottom line is that as a Director you can pay yourself whatever you like, if at all, the fact is if you do get investigated and the HMRC make the argument of how you can live on £100 per week, what will you say?

Nobody can live on that money and you will obviously rely on dividend. Given this argument the HMRC will (out)rightly accuse you of tax dodging.

Isn't this the realistic scenario? They obviously know all the tricks in the book and they know what to look for when you submit your figures at the end of the tax year. Should we not assume that they can detect such patterns and avoid them by paying ourselves at least the NMW?

P

No evasion of tax - dividends are from taxed profits of the company and are also taxable on the individual.

To pay yourself the £5220 and take the rest in dividend is responsible tax planning - you owe it to yourself and your company to minimise the tax liability within the boundaries of the law.

As was commented by a leading UK judge 'if it was a lawful act, however ill the motive may be, he had a right to do it'

I am staggered but not surprised to hear the advice to pay more to keep the taxman happy.

I also am totally unconvinced that you are less likely to be investigated by paying yourself the NMW or more.

[chicane]

Although the bottom line is that as a Director you can pay yourself whatever you like, if at all, the fact is if you do get investigated and the HMRC make the argument of how you can live on £100 per week, what will you say?

Just out of interest, what's your take on how this logic would apply to those of us cohabiting with a significant other, where their (salaried) earnings are sufficient to cover all monthly household outgoings?

Assuming this angle was covered, would there be any other reason (IR35 aside) for HMRC to call foul play?

[Peter Loew]

No evasion of tax - dividends are from taxed profits of the company and are also taxable on the individual.

To pay yourself the £5220 and take the rest in dividend is responsible tax planning - you owe it to yourself and your company to minimise the tax liability within the boundaries of the law.

As was commented by a leading UK judge 'if it was a lawful act, however ill the motive may be, he had a right to do it'

I am staggered but not surprised to hear the advice to pay more to keep the taxman happy.

I also am totally unconvinced that you are less likely to be investigated by paying yourself the NMW or more.

I agree with the judge, but although you may not be evading tax per se, you are avoiding income tax and that what it comes down to.

[daviejones]

My accountant advised paying £750 \ month....

What confused me though was the limit of £2100 \ month for dividend...I thought it was a £38K limit or else.....

[Peter Loew]

Just out of interest, what's your take on how this logic would apply to those of us cohabiting with a significant other, where their (salaried) earnings are sufficient to cover all monthly household outgoings?

Assuming this angle was covered, would there be any other reason (IR35 aside) for HMRC to call foul play?

You make a good point. If you were living with someone who could support your household living expenses then this would cover you.

Assuming this was covered, I don't see how the HMRC could legitimately cry foul other than to make a bit of noise. All such accusations would be pretty insubstantial...

But for those who live on their own or flatshare, do you agree that the HMRC could legitimately go after them using the aforementioned argument? I think they could and would.

[gables]

Yes, and I intend to pay myself a monthly salary that is in line with minimum wage. However, the minimum wage is set at an hourly rate.

Therefore, how many hours per week are considered "full time" for the basis of a salary that is above minimum wage?

The reason for asking this is that if I were to write myself a contract that said my monthly salary was based on 10 hours per week, with overtime voluntary and unpaid, this would clearly be nonsense. There must be a reasonable minimum number of hours which are considered full time for salary purposes.

I'm working full time at the moment (albeit temporary) and work 35 hours per week. My wife works full time and she does 37.5 hours a week. When I was contracting I considered 40 hours a week as standard, some of the permies I worked with were doing very much more

I'd go for either 35 or 37.5 hours per week.

HTH

[Jason D]

?

How could they?

There are many forms of income be it salary, rental, royalties, investments, trading, share ownership etc etc

Many people have no salary income and have huge income.

There is nothing illegal in drawing a low wage and the rest through dividends, someone show me otherwise.

[NotAllThere]

Quite right. Pay yourself whatever you feel like. Wait and see if you are ever prosecuted for not paying minimum wage.

Can't recall reading about such a case. But maybe you'd be the first.

[ctdctd]

I have started paying myself the minimum wage as the tax and NI burden of the two combined is under 20% (Gross Salary £897, Tax and Employer/Employees NI about £177) so it seems to me that there is nothing to gain by paying a smaller salary but getting the resultant dividend taxed at 20%? And this keeps things "Under the Radar" which seems to be a good thing to do! Also means I get some of the NI back as I'm contracted out of SERP's - or whatever it is called today.

Or am I missing something?