tax-free directors salary

[northernladuk]

Correct. Plus it's not actually in your pocket, the saving is in CT so it's still in the company. If you normally take dividends right up the 40% band then you will have to reduce them accordingly to remain under it because your salary has gone up. If you don't then you'll be paying 25% tax on that £14.42.

Down to 3 pints.

You then get a gig in London and you are down to half a shandy.. HTH

[doodab]

I am not a regular employee. I am a Director.

Indeed. So the liability for NICs depends on when you decide how much you will be paying yourself, when it's paid to you or if you have a "directors account" when it's credited to the account and when you draw money from the account. You need to redo the calculation every time you make a payment. Depending on how you date things it's quite possible that the full NIC liability on the salary could be due in month 1.

[kingcook]

Actually... the extra £153 salary you'd be taking (£7225 - £7072) would mean that you'd taking £153 less in lower rate dividends.

This is looking like too much of a blag for me. I'm out.

[Kugel]

Correct. Plus it's not actually in your pocket, the saving is in CT so it's still in the company. If you normally take dividends right up the 40% band then you will have to reduce them accordingly to remain under it because your salary has gone up. If you don't then you'll be paying 25% tax on that £14.42.

Down to 3 pints.

You get extra £156 in salary per year. Correspondingly company profit is reduced by £176.98. This results in net dividends reduced by £141.58 and gross dividends reduced by £157.31.

As you can see your total gross income is actually reduced by £1.31. It is 4 pints after all.

[Kugel]

This is looking like too much of a blag for me. I'm out.

No pain, no gain.

[psychocandy]

So, confused now. So its £14 extra then but you have the hassle of PAYE returns every quarter?

Nah, sod that for £14.

[Kugel]

So, confused now. So its £14 extra then but you have the hassle of PAYE returns every quarter?

Nah, sod that for £14.

It is £14 extra, but you have the hassle of 1 PAYE return per year - for the last quarter.

PS: And you are less likely to be selected for IR35 investigation because you pay employers NICs! Unlike those filthy tax avoiders.

[kingcook]

It is £14 extra, but you have the hassle of 1 PAYE return per year - for the last quarter.

PS: And you are less likely to be selected for IR35 investigation because you pay employers NICs! Unlike those filthy tax avoiders.

That is a good point actually. HMRC's selection process could be:

select * from limited_company where close_company = 1 order by nics_paid

[TheFaQQer]

PS: And you are less likely to be selected for IR35 investigation because you pay employers NICs! Unlike those filthy tax avoiders.

And your evidence for that is.....?

[legal]

After reading all these comments, I am wondering why my accountant is advising for £12k salary per annum instead of “tax code value”?

My Accountant's view is, paying 12K will cover national minimum wage. Is this necessary? If yes than people who pays around £8k won’t comply with this requirement?

Secondly, Paying no NI means I am not eligible for state benefits or sick pay etc (In case if I need to claim)? Hence I should pay 12K instead of tax code value.

What are your views please?