Umbrella->Limited : Getting nearly everything in dividends

[jamesbrown]

I'm such a doofus sometimes. I'd misunderstood what your personall allowance was for.

Which is great, as means an extra £500 a month take-home for me :-)

(I think).

Cheers guys,
Andy

Not sure where the £500 comes from, but your allowance is relevant

Anyway, just remember to use gross income amounts when comparing to the tax thresholds. This includes grossing up any net dividends paid (/.9 as indicated by Brett @ NW). Naturally, your accountant will help with all this.

[Brett at Nixon Williams]

Also note that the basic rate band is extended for the gross value of any personal pension contributions or gift aid payments made and hence will allow you to take a slightly higher dividend.

Brett

[blakeyuk]

Not sure where the £500 comes from, but your allowance is relevant

Could be my dodgy maths/tax knowledge again:

I thought I could take home £35000-ish as the limit before hitting higher rate tax.
Apparently that limited is £41000-ish.

Meaning I can take home £6K more than I thought.

Ergo, £500 a month?

(I should caveat this: I start contracting next week, so my discussions with my accountant have been somewhat theoretical at the moment).

Brett - I knew about extended the band, but my brain frazzled at the various computations, so I'll leave that to my accountant.

Andy

[Brett at Nixon Williams]

If you provide your accountant with all details about your earnings, discuss the salary options they should be able to outline the most efficient way forward. They should also be able to advise you of any likely tax you may need to save.

I hope all goes well.

Brett

[jamesbrown]

Could be my dodgy maths/tax knowledge again:

I thought I could take home £35000-ish as the limit before hitting higher rate tax.
Apparently that limited is £41000-ish.

Meaning I can take home £6K more than I thought.

Ergo, £500 a month?

(I should caveat this: I start contracting next week, so my discussions with my accountant have been somewhat theoretical at the moment).

Brett - I knew about extended the band, but my brain frazzled at the various computations, so I'll leave that to my accountant.

Andy

The discrepancy in your accounting was the Personal Allowance. I don't know your situation, but the standard allowance for 2013/14 is £9440, not £6000. Anyway, best of luck working through this with your accountant who should be able to provide hard info. based on your situation as of now (even if you haven't begun contracting yet).

[Andrew@Wisteria]

sorry I wasnt very clear. but the thread you are talking about actually answer my question !

Typically Umbrella's are very tax inefficient - the amount you pay in E'rs & E'ees NIC will wipe out a big chuck of your contract rate. Accountant fees can be comparable to Umbrellas fees (unless you are only contracting for a short period say 3 months) - Furthermore, as a Ltd you can register for the Flat rate VAT scheme which will probably pay for the accountant fees of running a LTd if longer contract - However obviously there is more record keeping / administration to do! The tax savings also depend on your daily rate.