If you're a contractor and pay yourself a salary then you'll get taxed 65.8%

[jamesbrown]

According to Bob Jones an ex-Inland Revenue tax inspector, paying yourself a minimum salary does make you a prime target.

What triggers an IR35 investigation? :: Contractor UK

Yeah, but I think that's a given, and covers the vast majority of contractors. Arguing about the precise level of that minimum salary is a non-issue IMHO. Anyone who thinks that paying themselves a minimum wage of 12k and paying some NI will reduce the risk of them being targeted is probably mistaken.

[Nixon Williams]

You should only worry about being investigated if you have something to hide!

If you ask for, receive and follow good professional advice then any HMRC enquiry should be fine, with nothing to worry about.

[jamesbrown]

You should only worry about being investigated if you have something to hide!

If you ask for, receive and follow good professional advice then any HMRC enquiry should be fine, with nothing to worry about.

Absolutely, although from what I gather, the process itself can be a PITA, so given the choice.... But you're absolute correct, and IR35 is such a non-issue in that respect - get new work, complete the due diligence, join PCG+ and then forget about it.

[GB9]

I would imagine that only those caught by IR35 would pay themselves such a high salary anyway

Speaking with HMRC I have been told that what they expect is someone to take a salary appropriate to the role they are fulfilling, with dividends being taken out of what remains i.e. company profit.

Now I have no idea if that is true or not and whether or not that knocks you off their target list. However, I am pretty sure it reduces risk, which is good enough for me.

[Moscow Mule]

...what they expect is someone to take a salary appropriate to the role they are fulfilling...

I think our bobs cost something like £10k a year...

[mudskipper]

Sorry folks. Got my tax years mixed up. Updated the original post. And yes, actually setting the salary exactly equal to the primary threshold was just hypothetical. I should have been clearer about that.

Is this your site? Impressive.

[northernladuk]

Is this your site? Impressive.

About as impressive of his tax knowledge IMO.

[Dallas]

About as impressive of his tax knowledge IMO.

Details

form done by bobs?

[IR35 Avoider]

Slightly over-dramatic but in 13/14 if you pay yourself a salary through your own Ltd company then the income between £32,010 and £41,450 will be hit by 65.8% "tax": 40% income tax + 12% Employee NI + 13.8% Employer NI.

I'm politely wandering if you had a liquid lunch before posting? Or maybe I did, since I'm the only one who appears to see a problem with this.

The 40% tax band starts at £32,010 of taxable income, in other words, given the personal allowance of £9,440 it starts at £32,010 + £9,440 = £41,450 of income.

12% employee NI on earnings above £7,755 up to £41,450, after which it drops to 2%. So you do not pay 12% employee NI and 40% tax on any chunk of income.

[BlasterBates]

Speaking with HMRC I have been told that what they expect is someone to take a salary appropriate to the role they are fulfilling, with dividends being taken out of what remains i.e. company profit.

Now I have no idea if that is true or not and whether or not that knocks you off their target list. However, I am pretty sure it reduces risk, which is good enough for me.

Absolutely, under those circumstances they´ll have the feeling the tax take is reasonable and then they go after the minimum wagers.

I don´t quite follow the logic that an HMRC officials treat all the contractors the same. It´s obvious they´ll focus on the ones avoiding the most, because that´s where they have the most to gain, given they can´t investigate everyone.