Umbrella->Limited : Getting nearly everything in dividends

[luciddreamerfrench]

Hi everybody,

I have been contracting for 5 months through an umbrella company and am now thinking of creating my limited company.

Given that :
my contract falls outside IR35
I am not interested in pension for the moment
Ive already earned a salary which is around the 10 12k braket that "most" accountant would suggest to extract as salary when I was working under my umbrella cie.

Could I potentially pay myself only in dividends when operating through my future Ltd company until year end (next April)? Or should I still pay myself with low salary (amount to be confirmed)?

I guess this is no definite answer to that question and this will have to be analyzed by my future accountant, but I wanted to have you guys point of view on the issue

Thanks!

[jamesbrown]

No, you don't need to pay yourself a salary as an officer (Director) of YourCo unless you have a formal contract of employment (in which case NMW legislation will apply). In short, you can pay only dividends if it makes sense to do so (or leave everything in the company, if you prefer), and your accountant will advise on that. The part about "my contract falls outside IR35"; make sure you've had the appropriate contract reviews and your working practices are aligned. Also, make sure you understand the concept of a warchest. Getting a good accountant is a good start

[NCOTBAC]

I thought we had some threads about moving from perm to contract mid year which is pretty similar is it not? From what I remember the advice was not to pay any more wages and stick to divis the rest of the year.

Found this which also throws in comments about already being in higher tax bracket which might apply.

http://forums.contractoruk.com/accou...scal-year.html

Ive already earned a salary which is around the 10 12k braket that "most" accountant would suggest to extract as salary when I was working under my umbrella cie.

What does this mean? You mean if you were working under your LTD? You don't need an accountant for a brolly and have little choice what you are paid?

[luciddreamerfrench]

I thought we had some threads about moving from perm to contract mid year which is pretty similar is it not? From what I remember the advice was not to pay any more wages and stick to divis the rest of the year.

Found this which also throws in comments about already being in higher tax bracket which might apply.

http://forums.contractoruk.com/accou...scal-year.html



What does this mean? You mean if you were working under your LTD? You don't need an accountant for a brolly and have little choice what you are paid?

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

[LisaContractorUmbrella]

Hi everybody,

I have been contracting for 5 months through an umbrella company and am now thinking of creating my limited company.

Given that :
my contract falls outside IR35
I am not interested in pension for the moment
Ive already earned a salary which is around the 10 12k braket that "most" accountant would suggest to extract as salary when I was working under my umbrella cie.

Could I potentially pay myself only in dividends when operating through my future Ltd company until year end (next April)? Or should I still pay myself with low salary (amount to be confirmed)?

I guess this is no definite answer to that question and this will have to be analyzed by my future accountant, but I wanted to have you guys point of view on the issue

Thanks!

Just as an aside - what makes you so sure you're outside IR35?

[Brett at Nixon Williams]

To further the point mentioned regarding dividends if you have basic rate band remaining, it would make sense to declare and take dividends (profit allowing) to take you up to the higher rate threshold for 2013/14 (£41,450 gross) as these would be free of further tax.

Taking the assumption that you have had gross earnings of £12,000 in 2013/14 thus far, then this would leave £29,450 gross band available. The dividend that could be paid free of tax would be 90% of this, i.e. £26,505.

As it has been mentioned above, the accountant you appoint should be able to advise on this having looked at your personal situation.

I hope this helps.

Brett

[blakeyuk]

... the higher rate threshold for 2013/14 (£41,450 gross) as these would be free of further tax....
Brett

Hi Brett,

I've seen the £41,450 figure in a couple of places (eg, Tax facts | A short guide to tax rates and allowances), but I thought it was £32,010 (see https://www.gov.uk/income-tax-rates)

Where does the £41,450 figure come from?

Andy

[jamesbrown]

Hi Brett,

I've seen the £41,450 figure in a couple of places (eg, Tax facts | A short guide to tax rates and allowances), but I thought it was £32,010 (see https://www.gov.uk/income-tax-rates)

Where does the £41,450 figure come from?

Andy

The rates are for taxable income above your Personal Allowance. The standard Personal Allowance is £9440 for 2013/14.

[TheFaQQer]

Hi Brett,

I've seen the £41,450 figure in a couple of places (eg, Tax facts | A short guide to tax rates and allowances), but I thought it was £32,010 (see https://www.gov.uk/income-tax-rates)

Where does the £41,450 figure come from?

Andy

Add the personal allowance of £9440 to the threshold of £32010 and you get £41450

[blakeyuk]

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