All things newbie (ways to work & what to claim).

[creativepresence]

I have just started contracting and have set up a Ltd company to work under. I have heard other contractors chatting about paying themselves a minimal wage. Some have mentioned enough to live (pay bills) whilst others have mentioned paying just over/below the tax band. Is this legal/valid way to work?

This then has knock on effects, as if i paid myself a very low wage to pay little or no tax, could i then get wage slips to show this low wage & then claim tax credits? would this be legal?

Next, if i am only paying a low wage & I have all this money sitting in my business account, how can I access it? I have heard about dividends. What are these?

Next, expenses... What can I claim...
I know about milage, but what is the most advantagous? x pence per mile or receipts? what is the amount per mile you can claim? is there a limit to the amount of miles you can do? I also heard about clothing allowance? plus my home is the registered office, i heard i can claim for the phone, heating, etc? is this correct? can I claim for my mobile phone? what are the restriction/requirements?

Of course I want to do everything by the book, but of course there is no point contracting unless the financial rewards are better then perming.

Sorry about all the questions, but hopefully if these are answered, it will help other newbies.

[xoggoth]

Not illegal AFAIK to pay salary just below tax/NI threshold but you may be more likely to attract IR attention. I was under impression that tax credits were based on all income not just salary so not sure how paying low salary helps. As a taxpayer I would certainly hope so anyhow.

Dividends are other way of taking out money. At intervals in year make up some minutes to say how much is paid and withdraw it. You should also issue a tax certificate to recipients showing amount and 10% tax credit. You show dividends in company accounts, also now you pay 19% CT on them. With GB in charge it is all rather complicated as you may expect.

Off memory its 40p/mile for 10k miles ands 25p thereafter. Expenses generally, I suggest you go to IR webtulipe and download Booklets 480 and 490 in pdf format.

[nobody here but us chicke]

noob

Given your lack of knowledge you should get a decent accountant asap.

[partimer]

proper advice

Get proper advice. Don't let a bunch of strangers on a board tell you how to run YOUR business ... An accoutant is pretty essential here.

Just use common sense.

Face it, if you get take 5k of salary but pull in 50k of dividend, anybody can see that you're trying it on. It may not be illegal but do you really want Gordon Clown's jackboot boys making your life a living hell (constant investigations, IR35 commissoners, s660a, etc.)?

[planetit]

Read some of the first timer guides

http://www.contractoruk.com/first_timers/index.html

http://www.pcg.org.uk/freelancing.html

http://www.sjdaccountancy.com/about/...ntractors.html

And get a good accountant.

[Mustang]

Hmrc

Contact your local business support team at HMRC and they can advise you of the free workshops they run. These cover all areas of tax/NI/PAYE/benefits and even some VAT. They are very informative and help you make some decisions.

HOWEVER, it is a minefield and as always, the best thing to do initially is get a good accountant. Doing these workshops will just make sure you are informed and can discuss intelligently with your accountant!!

Good luck!!

[Darren@UptonAccountants]

Accountant

As the above guys say, you definately need to speak/email an accountant!