Advice required

[gareth01422]

Hi Guys

Im new to this forum and need a little education on the life of a contractor.

Ive been contracted to a company for the past 15 months now and with all the changes to system I'm a little worried about getting my next tax bill. I recieved the first quater about 2 weeks ago anb it was only £5.12p. I assume this is because i havnt earned enougth for me goverment to tax me loads yet.

I would like to know what i can claim for as this is stressing me out a bit.

Gareth

[Bluebird]

Are you a Ltd company or going through an Umbrella service ?

[gareth01422]

Are you a Ltd company or going through an Umbrella service ?

Im not 100% mate, It all goes through Brookson, but i think im limited. and forgive me if this statment is wrong " im the director of the company so does this mean im limited or umbrella"?

[Bluebird]

Im not 100% mate, It all goes through Brookson, but i think im limited. and forgive me if this statment is wrong " im the director of the company so does this mean im limited or umbrella"?

If you are a director then PAYE is calculated differently, I think what happens [ although anaccountant will tell you ] is that you use up your allownace first before paying tax, whereas with a normal employee the allowance is spread over a whole year so the payment is the same each month/qtr.

I'd suggest you ring Brookson, if you are on min wage + divi, they should be able to provide you with a PAYE payment schedule for the whole year.

Hope that helps...

[MrRobin]

I think that;s true for NI but not PAYE. If you're paying yourself only slightly above the income tax threshold though, you will have a very low tax bill.

[gareth01422]

If you are a director then PAYE is calculated differently, I think what happens [ although anaccountant will tell you ] is that you use up your allownace first before paying tax, whereas with a normal employee the allowance is spread over a whole year so the payment is the same each month/qtr.

I'd suggest you ring Brookson, if you are on min wage + divi, they should be able to provide you with a PAYE payment schedule for the whole year.

Hope that helps...

Ah right

well thats how i used to get paid before, min wage and divi. Now they opened a new bank account in the name of "brookson (number)" and i get a lot more money in my account than i did before. including the VAT from the agengcy.

(sorry about the spelling - I'm an Engineer)

Gareth

[Anderson]

Gareth
I assume (as you're with Brookson) that you are paying yourself a directors salary of about £106 a week. The annual tax and NI bill on this ''salary'' will obviously be very low.

The rest of your income will be via dividends (after corporation tax has been allowed for). You will not pay any further personal tax on dividends paid out until you reach the higher rate tax band. Then you will be liable for higher rate tax, which the tax man will demand off you after you submit your personal tax return for that year.

I assume Brookson will tell you each week/month what your liability for higher rate tax is.

[gareth01422]

Gareth
I assume (as you're with Brookson) that you are paying yourself a directors salary of about £106 a week. The annual tax and NI bill on this ''salary'' will obviously be very low.

The rest of your income will be via dividends (after corporation tax has been allowed for). You will not pay any further personal tax on dividends paid out until you reach the higher rate tax band. Then you will be liable for higher rate tax, which the tax man will demand off you after you submit your personal tax return for that year.

I assume Brookson will tell you each week/month what your liability for higher rate tax is.

I think it would be best if i arranged a meeting with brookson and ask them to explain whats going on.

I know this a really ignorant way of doing things, but i get an amount of money in the bank, i pay myself out of that money, and leave some in for tax. which isnt a lot i must admit. I think i really need to sort this out.

thanks for the help guys.

[Old Greg]

I think it would be best if i arranged a meeting with brookson and ask them to explain whats going on.

I know this a really ignorant way of doing things, but i get an amount of money in the bank, i pay myself out of that money, and leave some in for tax. which isnt a lot i must admit. I think i really need to sort this out.

thanks for the help guys.

Good idea - try reading up a bit as well. I found this really useful (free to non-clients of SJD as well).

[Cowboy Bob]

including the VAT from the agengcy.

I know this a really ignorant way of doing things, but i get an amount of money in the bank, i pay myself out of that money, and leave some in for tax. which isnt a lot i must admit. I think i really need to sort this out.

Do not mess with the VAT man.

And again just to force the point:-

DO NOT MESS WITH THE VAT MAN

If you think that paying the wrong amount of tax is painful, you haven't seen anything until you've been reamed by the VAT man.