Corporation Tax and my accountant

[MrHelpful]

I need some honest advice based on others experience. I currently on average have 97k going through the business of which 15k is taken as salary. 21k as dividends. Earlier this financial year - I was benched for 2 months therefore had no income coming in reducing my gross revenue. My corporation for year 1 was 15k and for year 2 is 13k. Is this right? I am getting the impression I am paying too much. Working out net profit after PAYE/NI tax, VAT Returns, Expenses, CT - I have a net income of ~ 75k therefore I am paying in total 25% tax - is this good going or can I acheive what others on this board seem to say when they take home 80-90% - I know some of these methods are a bit close to the line.

Point 2

I use to pay my accountant £45/month but now he wants £90/month for the same service - I am sure this is because he has seen what I am bringing in. Times are hard and I am trying to build a war chest for the next time I need it but I keep getting the accountant who isn't delivering any additional services wanting more.

I am not paying them the increase at the moment and have stopped my standing orders... the threat of small claims court has come into play... what do I do?

[Moscow Mule]

what do I do?

1) It's not hard to work out. You should have your accounts in front of you if you've got the figure to pay so it should be obvious where the figure comes from.

2) Don't reneg on contracts - which I assume you have agreed to pay your accountant?

[Clippy]

2) You really should have discussed the increase in fees with your accountant before they came into effect.

I would have asked him why they have doubled and if not happy with the reason, would have tried to negotiate a modest increase or made plans to take my business elsewhere.

Stopping payment, as you have done, was not a smart move - sorry, you wanted honest advice.

Swallow your pride and discuss the fees like an adult with your accountant before you get dragged, unnecessarily, through the small claims court.

Once your relationship with your accountant is back on an even keel, ditch him for someone else.

[Iron Condor]

I need some honest advice based on others experience. I currently on average have 97k going through the business of which 15k is taken as salary. 21k as dividends. Earlier this financial year - I was benched for 2 months therefore had no income coming in reducing my gross revenue. My corporation for year 1 was 15k and for year 2 is 13k. Is this right? I am getting the impression I am paying too much. Working out net profit after PAYE/NI tax, VAT Returns, Expenses, CT - I have a net income of ~ 75k therefore I am paying in total 25% tax - is this good going or can I acheive what others on this board seem to say when they take home 80-90% - I know some of these methods are a bit close to the line.

If you are outside IR35 then paying yourself anything above minimum wage PAYE is just paying extra tax.
I think the NMW is about 6 pounds an hour which works at around 10K a year, even less if you were benched for 2 months. So if you went 8K salary + 30K dividend instead, this would save you several thousand in tax.

Many contractors will get to 80%+ take home by profit sharing dividends with a non working spouse, the last government called this 'income shifting' and tried to ban it but they failed in the supreme court.

If you build up cash reserves at year end then you may have to pay even more tax when you take that money out of the company, this will be either CGT when you close down the company or may be income tax if taken as dividends if you are high rate tax payer.

[Olly]

If you are outside IR35 then paying yourself anything above minimum wage PAYE is just paying extra tax.

No, this is not a FACT. There are other reasons people pay themselves a wage of x or y.
If you really wanted to minimise tax then pay yourself up the lowest bracket. £6475 or whatever it is. There appears to be no legal reason to pay minimum wage.

[Wanderer]

I use to pay my accountant £45/month but now he wants £90/month for the same service

Stopping payment is not a good negotiating tactic, it puts you straight onto the wrong foot. Did you agree to the rise or did they just unilaterally change it? Either way, you need to negotiate with the accountant. I would start by telling them that the new rate is unacceptable and if it doesn't come down then you are taking your business elsewhere.

Even if you do leave then you need to pay up and get a proper handover.

I think the NMW is about 6 pounds an hour

A company director is exempt from the NMW rules, they can pay themselves whatever they want.

[Maslins]

As long as the director doesn't have a contract of employment they don't need to be paid NMW. There's different schools of thought on this, some pay £5,712 (as this leads to no PAYE/NI at all), some £6,475 (still no PAYE, but is some NI), some much higher believing it puts them at less risk of investigation.

To the OP, your accounts will show turnover, less costs, leading to profit. You should also have been given a tax computation, which will show how that profit lead to your corporation tax bill. If you draw all profit out as dividends, you will likely have a sizeable personal tax liability as well.

As others have said, if you stop paying your accountant, don't be surprised if they do very little to help explain anything you don't understand. Also, I doubt you'll get much sympathy when in the same post you tell us you're bringing in on average £97k, then telling us times are hard.