1st time contracting - help please

[network]

@all Thanks for your valuable info. I was under the impression of paying £8500 as salary (yes i will check my p45 to see if i have used up all my allowance) but otherwise is this ok? because one my friends accountant said its better to take more than the threshold for hmrc purpose - dont knwo that means? does this make any thing to you guyz?

or as per all your advice if i take £624 or 7488/year i will be fine as per hmrc is it ?

@northernladuk - i have read probaly 100 of pages in different forums and hence the confusion. if i had the answeres then i woudlnt have even posted this. please help others who are new to contracting which is the main purpose of this forum

[northernladuk]

@all Thanks for your valuable info. I was under the impression of paying £8500 as salary (yes i will check my p45 to see if i have used up all my allowance) but otherwise is this ok? because one my friends accountant said its better to take more than the threshold for hmrc purpose - dont knwo that means? does this make any thing to you guyz?

or as per all your advice if i take £624 or 7488/year i will be fine as per hmrc is it ?

@northernladuk - i have read probaly 100 of pages in different forums and hence the confusion. if i had the answeres then i woudlnt have even posted this. please help others who are new to contracting which is the main purpose of this forum

There is no wrong off right. Different accounts have different views. Some say stay under the threshold and others say pay a bit and stay of the radar. They are all fine.

[Wanderer]

my friends accountant said its better to take more than the threshold for hmrc purpose - dont knwo that means? does this make any thing to you guyz?

I've heard suggestions that paying some PAYE/NI will keep the tax man "happier" and may reduce the risk of an investigation. Some accountants recommend you take a minimum wage or reasonable market rate salary (whatever that means) and the rest as dividends. Common recommendations are to draw £12k salary or pay the national minimum wage (not a legal requirement if you are a director) so that you pay at least some PAYE and NI.

or as per all your advice if i take £624 or 7488/year i will be fine as per hmrc is it ?

HMRC won't "like" it but that is the way the law is written so they have to abide by it (presuming you are outside IR35). It could be argued that paying yourself more than £7488 salary is effectively making a voluntary "Starbucks" style charitable donation to the tax man and you are perfectly within your rights to minimise your tax bill with a £7,488 salary.

It's your choice...

[network]

Thanks again.

Also i have included my spouse as a director in the company because an accountant asked me to do so. so i made it as 60:40 - is this fine. but by the looks of it because i am not on a high paid cntract rate, the dividends and salary itself will be enough i think without even including her - so can i reduce her percentage or even remove her from the company - so that hmrc dont eye me !!

also she isnt working at the moment but she is helping me in my ltd company admin work (my account says dont pay here salary but just pay dividend which will even help me for tax purpose) - is this correct ?

what if she does some part time work - still her earning will be just under the £7000 scale for this tax year

Thanks

[northernladuk]

Have a look at the welcome forums to see how to do a search on this site. The info can be found here...

http://forums.contractoruk.com/welco...uk-forums.html

Using this search using the terms 'NI Threshold' comes back with about 400 pages on info, most directly related and some the exact same question to yours.

NI threshold site:forums.contractoruk.com/accounting-legal/ - Google Search

I am sure you could narrow this down to a list of questions exactly the same as yours with some better search terms........

[northernladuk]

Can I ask if you are going to question every single decision your accountant is going to make? I wouldn't be paying someone that amount of money and not believe a word they say. Maybe a new accountant is required?

The wife as a shareholder has been done even more than than the NI questions. Use the search as these are all very basic questions.

Many can also be found in the Newbies guides to the right -->

[TheFaQQer]

Oh dear - read the first timer's guide. Please.

Also i have included my spouse as a director in the company because an accountant asked me to do so. so i made it as 60:40

I assume that you mean that you split the company share allocation 60:40. This has ABSOLUTELY NOTHING to do with being a director. My wife is a director of my company and owns no shares in it. Conversely, I own shares in Oracle but I'm not a director - see how it works?

The Arctic case settled the legislation between man and wife (and presumably civil partner, but I don't know and can't be bothered to check) - you can shift between you with no penalty.

by the looks of it because i am not on a high paid cntract rate, the dividends and salary itself will be enough i think without even including her - so can i reduce her percentage or even remove her from the company - so that hmrc dont eye me !!

If you are paying dividends, then you must pay them in accordance to the share holding - ie. 60% 40%. The other shareholder(s) may waive their right to receive the dividend money, but it's significantly easier to just do it. If you want to reduce her percentage then you can buy the shares from her, or (possibly) have her gift them to you. If you want to remove her from the company, then you need to get her to resign as a director - that won't impact her share holding, but since there is no correlation between shareholding and directorship, that's irrelevant.

also she isnt working at the moment but she is helping me in my ltd company admin work (my account says dont pay here salary but just pay dividend which will even help me for tax purpose) - is this correct ?

what if she does some part time work - still her earning will be just under the £7000 scale for this tax year

If she is an employee then you need to be paying minimum wage; if she is an office holder then you don't. If she is working for the company (whether an employee or an office holder), then if you pay her a salary for that work, this will reduce the company profit and so the amount of corporation tax to pay. I'd ask your accountant exactly why they are recommending you not to pay her for the work that she does and see what response they give you - apart from the "hassle" of having to run an additional person through PAYE, I can't see any good reason for not reducing the corporation tax burden.

[northernladuk]

If she is an employee then you need to be paying minimum wage; if she is an office holder then you don't. If she is working for the company (whether an employee or an office holder), then if you pay her a salary for that work, this will reduce the company profit and so the amount of corporation tax to pay. I'd ask your accountant exactly why they are recommending you not to pay her for the work that she does and see what response they give you - apart from the "hassle" of having to run an additional person through PAYE, I can't see any good reason for not reducing the corporation tax burden.

Welcome back TF!! Hope you are well...

I would expect in this case more than others they are not recommending paying her because the amount of admin that a low paying contract required equates to pretty much nothing so not worth the hassle and trying to justify it when required. Her not doing any work is a pretty good reason not to reduce corp tax

[TheFaQQer]

Welcome back TF!! Hope you are well...

I would expect in this case more than others they are not recommending paying her because the amount of admin that a low paying contract required equates to pretty much nothing so not worth the hassle and trying to justify it when required. Her not doing any work is a pretty good reason not to reduce corp tax

If it's a low-paid contract then I'd go brolly to be honest.

[psychocandy]

Thanks again.

Also i have included my spouse as a director in the company because an accountant asked me to do so. so i made it as 60:40 - is this fine. but by the looks of it because i am not on a high paid cntract rate, the dividends and salary itself will be enough i think without even including her - so can i reduce her percentage or even remove her from the company - so that hmrc dont eye me !!

also she isnt working at the moment but she is helping me in my ltd company admin work (my account says dont pay here salary but just pay dividend which will even help me for tax purpose) - is this correct ?

what if she does some part time work - still her earning will be just under the £7000 scale for this tax year

Thanks

Why is spouse a director? no need for this. She just needs to be a shareholder to split dividends.

And gone are the days of needing a company secretary anyway.

Dont worry about splitting dividends. Others might disagree but MOST accountants will say go for it as long as your married. Wont make any odds to HMRC for now.

As for the salary for the mrs thing. Be careful - U cant pay her £7K for two hours a month work. Thats dodgy.

Also, as NLUK says, all well and good to make sure you understand what the accountant tells you but you are paying them for advice so its best to listen to them.