Tax Code / P45 / Higher Rate Tax

[captainham]

Sorry but your current accountants sound pretty clueless, contractor-specific or not. You would be best served by binning them sooner rather than later and moving your business elsewhere.

As long as you've already been paid whatever the minimum is for an NI credit this year (somewhere in the region of £5-6k), then job done, no more salary needed this year.

Edit: you've been paid £35k already this tax year, just noticed. You are definitely sorted for an NI credit!

[Jessica@WhiteFieldTax]

Hmmm, So I'm even more confused now why my 'contractor' accountant would advise me to pay myself a 'tax efficient' salary when I have told them clearly that I have x amount of previous earnings in the tax year.

I'd thought I was obliged to pay some sort of token salary for NI, but then once I understood the NI threshold it started alarm bells ringing.
.

Its a valid question to ask.

However some people prefer to pay a small amount of NI from day one, even if they've gone over thresholds earlier in the year. Theres a feeling that it makes your new company more "legit".

Likewise some accountants are more comfortable if their clients are paying a small NI amount.

Alas, its not black and white - sometimes its an art form.

However your accountant should be able to give you a reasoned answer; if they don't then alarm bells are ringing.

[Obbiie]

I spoke with one of the very helpful accountants who posted in this thread. It was suggested that one other reason to take the salary, even though the NI threshold has been passed, was to prevent any red flags being raised in Hector's HQ which could lead to the inquisition knocking on your door.

To close out the account issues, I'm switching next week to the aforementioned helpful accountant.

Cheers all,

Kevin

[captainham]

I spoke with one of the very helpful accountants who posted in this thread. It was suggested that one other reason to take the salary, even though the NI threshold has been passed, was to prevent any red flags being raised in Hector's HQ which could lead to the inquisition knocking on your door.

I can understand the thinking behind this at least in part, but then I'm not planning to change my own plans on this for this tax year.

My business is a brand new start-up venture, it will take me some time to build up cash in the business to allow me to pay a salary and get my head around all the requirements of running a business, running payroll, etc, so I view the lack of salary as an integral part of establishing my business in the early days.

Without knowing how HMRC "works" (and I doubt even they do!), you could argue that paying a salary from day one might be as much of a red flag, as in "Why is this new business able to start up and immediately have enough cash floating around to pay the typical (and potentially suspicious) low salary method to it's Directors?"