Salary 2009/10

[Tax Lord]

Assuming you have a tax code of 647L (normal), your personal allowance for 2009/10 is £6475. This is tax free but not national insurance free.

£5,715 gross salary is tax free and national insurance free. The company will receive corporation tax relief of £1,200.


£6,475 gross salary, results in a paye payment of £181. (all national insurance). The company will receive £1380* corp tax relief.

£12,000 gross salary, results in a paye payment of £2,601, with a corp tax relief of £2689*

Anything over £12k will result in a greater paye liability than a corp tax saving.

*The company receives corp tax relief on gross + ers ni.

[ASB]

Assuming you have a tax code of 647L (normal), your personal allowance for 2009/10 is £6475. This is tax free but not national insurance free.

£5,715 gross salary is tax free and national insurance free. The company will receive corporation tax relief of £1,200.


£6,475 gross salary, results in a paye payment of £181. (all national insurance). The company will receive £1380* corp tax relief.

£12,000 gross salary, results in a paye payment of £2,601, with a corp tax relief of £2689*

Anything over £12k will result in a greater paye liability than a corp tax saving.

*The company receives corp tax relief on gross + ers ni.

I don't follow your reasoning

Certainly what the company pays in CT it's probably correct (can't be bothered to check) but in terms of what you as an individual may be able to receive net by structuring payments in a different way it is a bit off beam.

In terms of being able to return the highest possible amount to an individual via dividends or PAYE after all taxes the most effective way is a salary of 110 pw or possibly a little more depending upon the S2P tradeoff for NI contributions. All outwith IR35 of course.

I think you have forgotten the impact of EE's NI. In the 12k sample the company may well save 80 quid overall in CT versue PAYE - but the employee will have to pay about 600 quid of EE's NI which somewhat negates the saving. I'm not sure exactly where the crossover point is but it will be somewhere between the primary NI threshold and the single persons allowance of 6500 ish.

[Tax Lord]

If you pay yourself £12k gross salary for 2009/10 you will receive approx £10k net. ie costing you approx £2k in tax and ni. However your Ltd company will receive £2k corp tax relief.

So what you are paying out in one hand you are saving in the other.

[Lewis]

If you pay yourself £12k gross salary for 2009/10 you will receive approx £10k net. ie costing you approx £2k in tax and ni. However your Ltd company will receive £2k corp tax relief.

So what you are paying out in one hand you are saving in the other.

ASB is correct, you are forgetting employers NI. Use one of the many PAYE calculators online, e.g. http://www.listentotaxman.com/index....th&vw[]=wk

£12K Salary is taxed at £1193 PAYE, £722 Employees NI and £840 Employers NI. Total tax = £2755 -> £12840 has to come out of your company account to pay for the salary and tax.

£6K Salary is taxed at £0 PAYE, £62 Employees NI and £72 Employers NI. Total tax = £134 -> £6072 has to come out of your company account to pay for the salary and tax.

if comparing the two then yes you will have to pay extra corporation tax if you only pay yourself £6K (at 21%) on the difference, which is (12840-6072)*0.21 = an extra £1421.

So

£6K total tax (PAYE, NI+Corp) = £1375
£12 total tax (PAYE + NI) = £2755

You are about £1.5K worse off on a £12K salary compared to £6K.

[Archangel]

To follow on from Lewis's excellent post...

So the company can then pay the difference out as a dividend, so the net of paying 6k + divi would be

£11,284.72

versus

£10,085.00

for a 12k salary

So worse off by £1,199.72.

6k + divvie is the way to go, its a no brainer.

[Tax Lord]

The tax calculator gives exactly the same answers as I did with ers ni included. You are looking at 2008/09 not 2009/10.

I agree with Lewis, however I am not here to advise I was just pointing out options.

I am going back to sleep.