Paying too much salary?

[contractor79]

I pay myself £18k salary. Some have commented that this is too much. I read some posts on this forum where some of you guys only pay yourself £6k!

How much extra tax do I pay compared to you on this £12k difference? And would it look really dodgy if I reduced my salary down to £6k, after 18 months on £18k? My accountant advised me not to have my salary too low so I chose £18k, which is probably higher than it needs to be.

Second question- I pay myself more than £6k in pension from the company. Do you need to keep your pension payments from the company equal to the salary you pay yourself from the company?

thanks

[SueEllen]

Tip 1 - do a search on both topics they have been covered before.

Tip 2 - different accountants have different interpretations of the law

[oracleslave]

That sounds high to me. Not sure what the implications of reducing it but fwiw my salary is circa 10k.

[slackbloke]

I pay myself £18k salary. Some have commented that this is too much. I read some posts on this forum where some of you guys only pay yourself £6k!

How much extra tax do I pay compared to you on this £12k difference? And would it look really dodgy if I reduced my salary down to £6k, after 18 months on £18k? My accountant advised me not to have my salary too low so I chose £18k, which is probably higher than it needs to be.

Second question- I pay myself more than £6k in pension from the company. Do you need to keep your pension payments from the company equal to the salary you pay yourself from the company?

thanks

Did your accountant give any particular reason for it not being 'too low'?

[contractor79]

Did your accountant give any particular reason for it not being 'too low'?

to be honest I can't remember exactly, something about it looking a bit iffy if I got investigated so best to put it a few grand above bare minimum

though it's frustrating to find out that these laws can be interpreted in such a way

[slackbloke]

to be honest I can't remember exactly, something about it looking a bit iffy if I got investigated so best to put it a few grand above bare minimum

though it's frustrating to find out that these laws can be interpreted in such a way

yeah a lot of things are open to interpretation. I am doing about £1OK which is basically around minimum wage and 37hours a week. You also need to make sure salary is enough to make sure you cover NI contributions (don't want a contribution shortfall).

[RichardCranium]

I am doing about £1OK which is basically around minimum wage and 37hours a week.

2 accountants back I got told the same thing: it is illegal to pay yourself less than the minimum wage and £10k should cover it.

Current accountant says to pay no more than NI threshold.

Both were adamant they were right.

[MacBoy]

Forgive me for my n00bness, but how does this work? Can I for example, pay myself a £10k salary, when my monthly mortgage alone would eat all or more of that up over a year, leaving me with nothing to live on - in terms of what I was declaring at any rate!

Surely this isn't going to stack up in the face of even the lightest scrutiny?

[ASB]

2 accountants back I got told the same thing: it is illegal to pay yourself less than the minimum wage and £10k should cover it.

Current accountant says to pay no more than NI threshold.

Both were adamant they were right.

The DTI view is that the NMW legislation does not apply to directors unless they have a contract of employment.

[RichardCranium]

The DTI view is that the NMW legislation does not apply to directors unless they have a contract of employment.

Funnily enough, I do!

I wrote it; it is quite noddy and I cobbled it together from the permie contracts I still have going back 2 decades. I did it specifically so I could state:

"It is company policy that no employee will exceed the hours specified in the European Working Hours Directive. No employee will be asked to opt out of any such agreement."

I did that so when an agent asked me to, I could say "Sorry, can't".

It used to be an issue a few years back, the agents don't seem to bother with it now.

It does feel nice, though. Proper printed Articles & Memorandum, framed Certificate of Incorporation, a company seal, share certificates and an employment contract. Some people call that a waste of money but if 'feels' nice: I, me & my missus, own all that stuff.