2014 Salary - £10K it is

[psychocandy]

Recommended by my accountant as most tax efficient salary for next year because of the special £2K thing.

Guess I'd better read up about that.

[GazCol]

You could also search?

[BrilloPad]

Optimum company salary & divi 2014/15 | AccountingWEB

As from 6 April 2014 all businesses will be allowed to reclaim employers’ secondary NIC payable up to a £2,000 limit. Therefore, it will now usually be best advice for a director to receive a salary of £10,000 per annum (Personal allowance) instead of limiting the payment to the NIC secondary threshold as has been usual up to now. The employer incurs employer’s NIC of £282.07 and the employee pays NIC of £245.28. (anyone like to check my figures!)

As the employer’s NIC payment is below £2,000 then this amount will be returned thus making the taking of additional salary more tax efficient overall compared with the taking of dividends below the £10,000 level.

You can use the star symbol to the left of this post to thank me.....

[psychocandy]

Optimum company salary & divi 2014/15 | AccountingWEB

As from 6 April 2014 all businesses will be allowed to reclaim employers’ secondary NIC payable up to a £2,000 limit. Therefore, it will now usually be best advice for a director to receive a salary of £10,000 per annum (Personal allowance) instead of limiting the payment to the NIC secondary threshold as has been usual up to now. The employer incurs employer’s NIC of £282.07 and the employee pays NIC of £245.28. (anyone like to check my figures!)

As the employer’s NIC payment is below £2,000 then this amount will be returned thus making the taking of additional salary more tax efficient overall compared with the taking of dividends below the £10,000 level.

You can use the star symbol to the left of this post to thank me.....

how about a thank and a like?

[Clare@InTouch]

£12,000 is still worth consideration. It's in line with National Minimum Wage, which you don't need to consider if you're a director, but should be thinking about if you want to claim you're an employee and therefore entitled to employee statutory payments like SSP, SMP etc.

[psychocandy]

£12,000 is still worth consideration. It's in line with National Minimum Wage, which you don't need to consider if you're a director, but should be thinking about if you want to claim you're an employee and therefore entitled to employee statutory payments like SSP, SMP etc.

Unlikely that I will ever need SMP :-)

Although, last year I did claim SPP (and paid salary of £7000 or so). Is that different?

Interested to see how much extra tax/NI is payable on £12K as opposed to £10K?

[Martin at NixonWilliams]

Unlikely that I will ever need SMP :-)

Although, last year I did claim SPP (and paid salary of £7000 or so). Is that different?

Interested to see how much extra tax/NI is payable on £12K as opposed to £10K?

On the additinal £2k you will pay 20% income tax and 12% employees NI, so 32% overall - Offset with the CT saving of 20% it will cost you 12% overall.

There is no reason why a director with no written contract of employment should need to consider NMW so I would stick with £10,000

[Clare@InTouch]

Unlikely that I will ever need SMP :-)

Although, last year I did claim SPP (and paid salary of £7000 or so). Is that different?

Interested to see how much extra tax/NI is payable on £12K as opposed to £10K?

This issue is that you're only entitled to statutory payments if you're an employee. If you're an employee then surely NMW applies. Yet many people pay £7k on the grounds that they are a director not an employee, and therefore NMW doesn't apply. Something of a paradox.

The difference would be:

£12,000 - £907.76 in Ee NI and Tax with £594.48 in Er NI.
£10,000 - £269.39 in Ee NI and Tax with £317.94 in Er NI.

So if we ignore Er NI (due to the allowance that will kick in next year) it would £907.76 vs £269.39 = £638.37.

(this is using a tax code of 1000L but this years NI rates, so it'll be slightly different next year).

[Martin at NixonWilliams]

So if we ignore Er NI (due to the allowance that will kick in next year) it would £907.76 vs £269.39 = £638.37.

The £638 Clare mentions less the £400 saved in CT = £238, being the 12% (of £2,000) I mentioned above.

[northernladuk]

You can use the star symbol to the left of this post to thank me.....

We don't do stars in the professional part of the forums. Reputation is far to childish and totally beneath us here. Have a thumbs up and a smiley face.