Is £10k the optimal 2014/15 salary when 10% dividend tax credit is factored in?

[Andrew@Wisteria]

It is not the same at all - You are only considering the take home pay and not the overall picture.

We have identified that in both cases the take home pay is broadly the same.

If you take a £10,000 salary, the cost to the company is £8,000 after CT relief. In addition, you declare dividends of £28,679. The impact on the company's retained earnings is £36,679.

If you take a £7,800 salary, the cost to the company is £6,240 after CT relief. In addition, you declare dividends of £30,659. The impact on the company's retained earnings is £36,899.

The £10,000 salary therefore gives you around the same take home pay and costs the company £220 less. If this £220 is taken as a dividend, there's an additional £165 take home pay.

Point taken - however, from the point of view of the client, for the sake £165 and the likelihood they will get it wrong because they have been used to just drawing a salary, for simplicity it makes sense to me to pay at a level that does not attract Ee's NI.

Not to mentioned the additional grief you are likely to get when the client does it wrong.

[Jeremiah@RHJAccountants]

It's another payment / deadline to keep on top of - a lot of contractors I come across find it hard enough to keep on top of one of two. Obviously for those seasoned contractors less of an issue.

Really one more payment to keep on top of!

Do your clients pay you on time

If the contractor is having regular contact with their accountant and the accountant is letting them know when to pay any liabilities well before the deadlines.

There is no problem surely ? this is how i work with my clients

Plus with HMRC you can set up directs for payment so even easier.

If contractors cant do this then to quote NLUK " are you sure they are cut out to be a contractor"

[Martin at NixonWilliams]

Point taken - however, from the point of view of the client, for the sake £165 and the likelihood they will get it wrong because they have been used to just drawing a salary, for simplicity it makes sense to me to pay at a level that does not attract Ee's NI.

Not to mentioned the additional grief you are likely to get when the client does it wrong.

I don't think you are giving your clients much credit here Andrew - I agree it is a simpler way of doing things but to cost your client for the reason you think they will get it wrong is not fair on those who do things properly which, in the case of our clients, is the vast majority.

[TheFaQQer]

Point taken - however, from the point of view of the client, for the sake £165 and the likelihood they will get it wrong because they have been used to just drawing a salary, for simplicity it makes sense to me to pay at a level that does not attract Ee's NI.

Not to mentioned the additional grief you are likely to get when the client does it wrong.

So you're now saying that it's not about the net position being the same, it's about making things simple?

If you want to make things simple, why aren't you suggesting a £0 salary, since that removes the need to operate payroll and RTI (including the additional grief you are likely to get when someone does it wrong)?

[TheFaQQer]

I don't think you are giving your clients much credit here Andrew - I agree it is a simpler way of doing things but to cost your client for the reason you think they will get it wrong is not fair on those who do things properly which, in the case of our clients, is the vast majority.

Maybe Andrew's clients are of a different calibre than those of NW?

[Old Greg]

Point taken - however, from the point of view of the client, for the sake £165 and the likelihood they will get it wrong because they have been used to just drawing a salary, for simplicity it makes sense to me to pay at a level that does not attract Ee's NI.

Not to mentioned the additional grief you are likely to get when the client does it wrong.

Will you give each of your clients a £165 p.a. reduction as it's not really much money?

[ContrataxLtd]

I don't think you are giving your clients much credit here Andrew - I agree it is a simpler way of doing things but to cost your client for the reason you think they will get it wrong is not fair on those who do things properly which, in the case of our clients, is the vast majority.

+1 to that.

If you're always in touch with clients and advise them in plenty of time it's hard to go too wrong. I'd certainly want some extra cash in my pocket for the sake of a 2 minute bank payment.

[Andrew@Wisteria]

Maybe Andrew's clients are of a different calibre than those of NW?

A lot are new to this game - and find it already quite overwhelming - so perhaps!

[Old Greg]

A lot are new to this game - and find it already quite overwhelming - so perhaps!

How do they manage to pay VAT or CT?

[Jeremiah@RHJAccountants]

How do they manage to pay VAT or CT?

Or even there accountant very overwhelming