Pay Salary in advance

[Sockpuppet]

Saving myself £1250 of CT for year ending May 2012? Or am I missing something obvious here?

Your missing something obvious. All your doing is delaying a CT payment of £1200 by a year and rolling that forward. You'll have to pay this eventually (in the final year the company trades). Also your accountant may want to treat this salary as an pre payment/deferred expense which won't affect CT at all.

In short not worth doing.

[psychocandy]

Your missing something obvious. All your doing is delaying a CT payment of £1200 by a year and rolling that forward. You'll have to pay this eventually (in the final year the company trades). Also your accountant may want to treat this salary as an pre payment/deferred expense which won't affect CT at all.

In short not worth doing.

Dont agree. Whether accountant treats salary as pre-payment/deferred expense is another matter of course. In this case, it'd be pointless but if you can allocate the cost of the salary to this years company expenses then surely you;re better off?

Taking my example and making it easier saying my profits (before salary) for each year are exactly £10K. Suppose company stops trading May 2013.


Year end May 2012
Pre-Profit £10K
Salary £7.5K in April 2012
Profit £2.5K = CT of £500

Year end May 2013
Pre-Profit £10K
Salary £7.5K in April 2013.
Profit = £2.5K = CT of £500

OK, but doing it the conventional way:-

Year end May 2012
Pre-profit £10K
Salary of £1250 (2 months april and may)
Profit = £8750 = CT of £1650

Year end May 2013

Pre-Profit £10K
Salary of £7500 (£625 per month, June 2012-May 2013)
Profit = £2500 = CT of £500

EDIT: although in my example you've paid yourself a salary for the whole year April 2013-May 2014 even though the company stopped trading.

[psychocandy]

Paying the salary in advance would create a loan, and that would be subject to the usual loan taxes - benefit in kind if over £5,000 and potentially s455 if it crosses a year end.

But is there any reason why if you were a permie you could work for a company who said they'd pay you upfront on april 6th for the coming year?

Doesnt happen but is there any reason why not?

[northernladuk]

But is there any reason why if you were a permie you could work for a company who said they'd pay you upfront on april 6th for the coming year?

Doesnt happen but is there any reason why not?

Common sense possibly???

[Platypus]

Doesn't happen but is there any reason why not?

(1) On April 7th I don't turn up at work. I get another job. They have to sue to get their money back.

(2) On April 7th I have one helluva party, forgetting all about my mortgage payments ...

Of course (2) is why lots of people get paid weekly.

[psychocandy]

Well yes there are obvious reasons why permies dont get paid yearly but that doesnt mean that you cant if you want to.

[Clare@InTouch]

But is there any reason why if you were a permie you could work for a company who said they'd pay you upfront on april 6th for the coming year?

Doesnt happen but is there any reason why not?

For a normal employee the tax would even out, but the NI wouldn't - paying £624 per month from April to March 2013 would mean no NI. Paying £7,488 in April 2012 would.

[psychocandy]

For a normal employee the tax would even out, but the NI wouldn't - paying £624 per month from April to March 2013 would mean no NI. Paying £7,488 in April 2012 would.

OK. I forgot that. But for a Director?

[Clare@InTouch]

OK. I forgot that. But for a Director?

Then NI won't kick in until you go over the annual level, so no. There would be a big tax bill, but that would get refunded through the year if you had any further salary, or after the year by HMRC when they processed the P60 if not.

[psychocandy]

Then NI won't kick in until you go over the annual level, so no. There would be a big tax bill, but that would get refunded through the year if you had any further salary, or after the year by HMRC when they processed the P60 if not.

Ah. Of course, you'd have to pay tax initially on the basis of you getting £7500 every month would you?