newbie

[carabind]

Hi all

I have recently taken redundancy from a well known blue chip (at end of 9/12) and have been offerred a short term contract by an existing contact - 3-6 months max which is great. I have a great programme manager who has suggested I set up a ltd company (done - FY year ends in Nov 13) so as to maximise take home pay.

I can get my head around the principles of taking a very small salary and maximum dividends to minimise income tax and NICs

My query is more around the current year. My P45 give cummlaive pay to date of over £85k, so I am well into the max tax bracket - in fact I reckon they owe me circ £5K as that was in P6 and I have earnt nothimng so far. With that in mind, when I start trading/invoicing in Dec 12, am I best not to take any salary till next FY? and would the same apply for dividends? Then take what I need over Apl-NOv 13 (ie when the company FY ends?)

Thanks

[northernladuk]

Firstly welcome..

Secondly read the newbie guides on the right hand side. The answers to everything you want to know and a ton of stuff you don't know at this moment can be found in there. There will be a host of information you want to ask questions on but it has all been asked many times and is document in the list to the right.

Thirdly have a look at the welcome section particuly the thread linked below. It will show you how to search the forums for your questions. I am sure you can imagine at this point every question you have has been asked numerous times.
http://forums.contractoruk.com/welco...uk-forums.html
The question about how to dovetail permie to contract money has been asked a number of times particularly

Lastly, get an accountant quickly. He will help you set up your company and advise you on issues such as this. There are a number of great people that actually post in these forums but below is a thread of recommended accountants plus other threads for local guys.
http://forums.contractoruk.com/accou...-requests.html

Take the time to read everything as it will help you get started much quicker than asking the odd question here and there.

[Alan @ BroomeAffinity]

Any income you take from your company before 05/04/13 will be taxed at the higher rate so if you can afford it it may be better to wait until after that date to take any company income. However, this may just be kicking the can down the road if you are going to have significant income in that year as well. Get an accountant and talk it through.

[carabind]

many thanks chaps for prompt answers.
I do take the point about licking the can down the road but there may be some advantages to doing this if only to keep the permanent and contracting streams apart.
I do have access to an accountant but wanted to do as much groundwork as I can in advance

[Jeremiah@RHJAccountants]

As you are already in the higher rate tax bracket any income you take from your company be it salary or dividends would be subject to higher rate tax.

My advice is if you can wait until after 5 April 2013 and then start on the low salary/dividends method.

Also as NLUK says speak to some accountants as the advice and potential tax savings we can inform you of are in my opinion invaluable to new contractors like yourself and old contractors too

[carabind]

thats what I thought. Thanks for comnfirmation

[speling bee]

One more thing... if you are into saving for a pension, this year might be a good time to do it, using your Ltd's income, given the amount you've already been paid.

[lithium147]

I would try to do without an accountant until april next year.
Your gonna get taxed highly if you take money out before then. So just leave it there.
You can do the following quite easily on your own:
- incorporate limited company (£15 - companies house)
- register for VAT + FRS (free - online.hmrc)

You dont need to register for PAYE or CT for a while.
So if you are paying £100 a month for accountant, you could save yourself perhaps £400 (4 months).

You can learn about expenses and invoices on sites like this.

[captainham]

You can learn about ignoring everybody's else opinions and making up your own rules and scams to suit you on sites like this.

FTFY.

[Wanderer]

So if you are paying £100 a month for accountant, you could save yourself perhaps £400 (4 months).

Yeah you could do that but it's a false economy in my view. Getting proper advice from an accountant based on a detailed analysis of your tax affairs is going to save a lot more than £400. Messing up the formation of your company or doing the wrong thing could cost you dearly too.

The original poster isn't exactly on slave labour rates and can well afford an accountant....