Salary paid to yourself.....

[psychocandy]

Probably been asked about a million times.

My current accountant says pay £7000 odd. Enough to pay so you get credited NI but not enough to pay any tax or NI. This year because I've already been paid £12K in redundancy PILON payments he says no point pay zero !!!

Been looking for a new accountant and see In touch recommend paying NMW (i.e £10K or so a year). Whos right? Obviously with this way you're going to be paying 'some' more tax/NI?

There doesnt seem to be a right or wrong answer so what to believe?

[Fred Bloggs]

There is no right and wrong. FWIW, I pay £10k salary, but there is no real reason why I do so. It just feels right.

[DaveB]

There is an argument that paying around 10k and paying the resulting PAYE/NI will keep you off the radar for HMRC. Some people agree, some don't, there doesnt seem to be any concrete evidence one way or the other. IN the end it's personal choice.

[SueEllen]

This has come up before do a search for all the ins and outs.

However there are two schools of thought:
1. Pay yourself national minimum wage as you are less likely to trigger an IR35 investigation
2. Pay yourself enough to be credited with NI as IR35 investigations aren't triggered like that.

However bear in mind Directors are not subject to the National Minimum Wage legislation. One reason for that is if you hire staff you have to pay them properly but to keep a business running during hard times you can get away with not paying yourself.

BTW I pay myself around £7,000.

[psychocandy]

This has come up before do a search for all the ins and outs.

However there are two schools of thought:
1. Pay yourself national minimum wage as you are less likely to trigger an IR35 investigation
2. Pay yourself enough to be credited with NI as IR35 investigations aren't triggered like that.

However bear in mind Directors are not subject to the National Minimum Wage legislation. One reason for that is if you hire staff you have to pay them properly but to keep a business running during hard times you can get away with not paying yourself.

BTW I pay myself around £7,000.

Thats just so weird. I mean if you're a permie you pay a standard rate of tax. Hard and fast rules.

If you're a company director, it depends on what you think or what you're accountant thinks. i.e, you can volunteer to pay more tax for no tangible reason.

For instance, current account says, nah, pay £7K a year. Another accountant says £10K because paying NMW looks uncommercial in the eyes of the HMRC.

Whos right?

[psychocandy]

Incidentally, off the top of their head, whats tax/NI cost of £10K rather than £7K?

[Fred Bloggs]

Thats just so weird. I mean if you're a permie you pay a standard rate of tax. Hard and fast rules.

If you're a company director, it depends on what you think or what you're accountant thinks. i.e, you can volunteer to pay more tax for no tangible reason.

For instance, current account says, nah, pay £7K a year. Another accountant says £10K because paying NMW looks uncommercial in the eyes of the HMRC.

Whos right?

There is no right or wrong, you as a director are reponsible for running the company in line with all current legislation. That is all you need to do. What you pay yourself is largely your decision provided the company is solvent.

[SueEllen]

Thats just so weird. I mean if you're a permie you pay a standard rate of tax. Hard and fast rules.

If you're a company director, it depends on what you think or what you're accountant thinks. i.e, you can volunteer to pay more tax for no tangible reason.

For instance, current account says, nah, pay £7K a year. Another accountant says £10K because paying NMW looks uncommercial in the eyes of the HMRC.

Whos right?

No one.

You need to remember the rules on Directors cover different size businesses.

[psychocandy]

Found it. OK have I got this right?

Employees NI on £12K = £572, employers NI = £680, Total = £1350 odd. But then I guess the employers NI is an expenses then.

Looks like about £1000 per year to do it this way. Hmmm....

If this is what is needed then fair enough but its weird to shell out an extra £1K just in case..... Confused.

[psychocandy]

There is no right or wrong, you as a director are reponsible for running the company in line with all current legislation. That is all you need to do. What you pay yourself is largely your decision provided the company is solvent.

But you ask two different accountants and get two different answers !!!! Surely you pay an accountant for his knowledge and expertise...