1st time contracting - help please

[network]

Hi,

I am new to contracting. Just a quick question. my account says i can take a minimum salary of £625 / month - (7500) (for this 2012-2013). is this correct because i thought it was £8105 this year?

Also is a threshold that a director should take ? any advantage of taking more as salary ?

Thanks

[jmo21]

NLUK.....NLUK!!!!!

I got one, I got one!!!!!!!!

[quackhandle]

qh

[Nixon Williams]

Hi,

I am new to contracting. Just a quick question. my account says i can take a minimum salary of £625 / month - (7500) (for this 2012-2013). is this correct because i thought it was £8105 this year?

Also is a threshold that a director should take ? any advantage of taking more as salary ?

Thanks

The tax and NIC thresholds are no longer all at the same level, so whilst you can earn £8105 will no tax deducted, you will be subject to NIC.

Simply put, the most efficient salary to take without being subject to any income tax or NIC is £7,488 for the current tax year.

Alan

[northernladuk]

[jamesbrown]

any advantage of taking more as salary ?

Yes, you can purchase more Tangfastics.

[Wanderer]

Come on lads, keep it professional.

Simply put, the most efficient salary to take without being subject to any income tax or NIC is £7,488 for the current tax year.

So paying £625 will result in a very small amount of NI due? Is it worth paying a pound less £624 so there is no NI due at all and this avoids having to make an NI payment at all (which would involve getting reference numbers, bank account details etc, etc)...

The other thing for network to consider is that if you have recently started contracting after working in a permie job then check your P45 because your tax free £7488 allowance may be used up by previous earnings since 6th April 2012. If this is the case then defer paying yourself a salary until the next tax year which starts on the 6th April 2013 and take dividends only.

[northernladuk]

Come on lads, keep it professional.

We are keeping it professional. The message to the OP is we are not overly willing to help if he isn't going to do a bit of work himself.... like read the first timers guides or search the forums. Either of which would have not only answered his question but answered a bucket load of questions he probably hasn't even thought of yet.

[Nixon Williams]

So paying £625 will result in a very small amount of NI due? Is it worth paying a pound less £624 so there is no NI due at all and this avoids having to make an NI payment at all (which would involve getting reference numbers, bank account details etc, etc)...

The other thing for network to consider is that if you have recently started contracting after working in a permie job then check your P45 because your tax free £7488 allowance may be used up by previous earnings since 6th April 2012. If this is the case then defer paying yourself a salary until the next tax year which starts on the 6th April 2013 and take dividends only.

I am not sure why you would want to pay £625 and so incur NIC payments, the actual payments would be less than £2 over the year so it would not achieve anything. I would advise to keep it at £624 and then it is simple, no NIC to pay. Assuming you have no alterations to your tax code, there would be no tax to pay either.

I note your comment regarding the situation if you have started contracting part way through the year. If you do pay the salary in full (£7,488 for 2012/13) then you would not be any worse off, although agreed that the savings would not always be there.

Each case can be different, so discuss it with your accountant.

Alan

[Wanderer]

Good answer. Thanks, Alan.

network, there's your answer: £8,105 is where you start paying PAYE but £7,488 is the limit for starting to pay NI. Make it £624/month so you don't have to pay any NI at all and take the rest as dividends but double check your P45 and tax code to make sure taking this salary won't result in NI or PAYE being charged due to other earnings this tax year.