Getting ahead of years salary payments in case of no contract before year end

[The Spartan]

Fair enough. But valid info for those who decide to go down this route.

If you dont want to ever claim or its not appropriate for your circumstances then fair play...

Very valid indeed, with me I hope never to find myself in this situation and given I'm down here I'm building my warchest and planning for the future.

[northernladuk]

How can it be possible for a contractor to be in a situation where they can even claim this? Stopping paying yourself from your business bank when there is money available to claim JSA has surely got to be wrong. If there is no money in the bank to pay yourself then something is even more wrong.

The idea the contractor cannot make enough and has to rely on JSA is utterly ridiculous.

[TheFaQQer]

How can it be possible for a contractor to be in a situation where they can even claim this? Stopping paying yourself from your business bank when there is money available to claim JSA has surely got to be wrong. If there is no money in the bank to pay yourself then something is even more wrong.

The idea the contractor cannot make enough and has to rely on JSA is utterly ridiculous.

The system lets you. And (as has been argued before) scrotes can do it, so contractors should do it as well.

[jamesbrown]

The idea the contractor cannot make enough and has to rely on JSA is utterly ridiculous.

I'm not sure that's the utterly ridiculous part, given that it's meant to be used when a genuine need arises (contractors are not immune from hardship, although many of us around here might question whether contracting was for us in that situation). However, the ridiculous part is trying to somehow optimise the JSA claim in advance. That is indeed ridiculous.

[BolshieBastard]

OK. So you start out the year with an annual salary in mind. All works out well if your in contract, just pay annual salary/12 per month and job done.

BUT, if you suddenly find yourself without a contract and want to claim JSA you've got to stop paying that salary.One good thing is that if claim for a bit then subsequently get a gig BEFORE tax year end you can 'catch up' again. (i.e. if you missed a month just pay double salary next month). It does invoke a PAYE payment this way but you do get it back at tax return time.

The problem occurs when you find yourself without gig near year end. If you end up not getting a gig before april you potentially will waste some of your tax benefits.

Example:-

Pay yourself £10K per year. Means zero tax and not a lot of NI.
However, come March 1st and you're without gig so you want to claim JSA.
Before you do this, assume all reserves in company are paid out in dividends so theres zero in there.
(Yes, I know this whole thing does not work if you've got large warchest in company or personal funds).

So, by end of tax year, you've basically paid yourself £833 less than is optimum and, in effect (because you paid as dividend) paid 20% CT on it = £167. Of course, if you get gig before end of tax year just pay yourself sharpish to use the £10K.

As you can see though, losing £167 is still preferable to not claiming JSA for the month at £72/week = around £300 a month.

So way around this? Maybe. Nothing stopping you paying youself double salary in Feb (knowing gig is ending). It will incur some PAYE but ultimately it means you'll get the whole salary in just in case you dont manage to in march.

Still leaves you free to claim JSA in march. Bit of a hassle maybe but perfectly legal it seems. There no reason why you can pay yourself the years salary up front on April 6th each year after all (but probably not clever because you'd pay upfront PAYE and then have to wait to get it back).

Of course, all makes no difference if you get a gig before end of tax year but this seems like a plan if you find yourself on the dole just before year end.

And yes I know its not a huge amount if you're in a gig but it could be for some on the bench. And please lets not turn this into another discussion about the rights and wrongs of claiming JSA.

Sorry, what's the issue here?

As a contractor you have a salary. You either take that when you're not working in which case you're not unemployed so cannot claim Conts based JSA or, you stop taking your salary when out of contract and can claim Conts based JSA.

If you have a retain profit in your co and you withdraw that, you'll likely find you're over the Income Based JSA limit so cannot claim that. You'll still be able to claim Conts based JSA irrespective of any savings you have subject to having enough NI Contributions or credits and not having received the x number of weeks JSA Conts is paid for in the last 12 months.

And before anyone starts, I dont see an issue with a contractor claiming JSA if they arent working. You pay contributions \ get credits so claim your entitlement when you need it.

[BolshieBastard]

How can it be possible for a contractor to be in a situation where they can even claim this? Stopping paying yourself from your business bank when there is money available to claim JSA has surely got to be wrong. If there is no money in the bank to pay yourself then something is even more wrong.

The idea the contractor cannot make enough and has to rely on JSA is utterly ridiculous.

Calm down!

First you need to understand JSA has two elements, an NI Contributions based element and an Income Based element.

If you have paid sufficient NI Conts or obtained credits, you can claim JSA Conts if you are not working and taking a salary from your co. JSA Conts pays a basic entitlement and doesnt pay anything for dependents.

Income Based JSA takes into consideration how much savings you have (or have deliberately disposed off so as to make a claim). If you're over the savings threshold, you dont automatically get JSa IB although in cases of hardship, you can appeal against this. JSA IB can pay increases for dependents.

Virtually no contractor will be eligible for JSA IB wheile almost every contract could claim and receive JSA Conts if they wished.

Government and HMRC take enough cash off you. I dont see a problem claiming 70 odd quid a week if you're finding it hard between contracts but each to their own.

[northernladuk]

Calm down!.

BB telling me to calm down?

[BolshieBastard]

BB telling me to calm down?

[BigTime]

I get paid my salary once a year. How would that work with JSA? I've never claimed it and have no intention of doing so but would be interested to hear your expert opinion.

[psychocandy]

How can it be possible for a contractor to be in a situation where they can even claim this? Stopping paying yourself from your business bank when there is money available to claim JSA has surely got to be wrong. If there is no money in the bank to pay yourself then something is even more wrong.

The idea the contractor cannot make enough and has to rely on JSA is utterly ridiculous.

NLUK - Please not again. As I've said a gazillion times, its all legal and above board and allowable. Not in every case I agree but a lot.
I appreciate you dont agree with the idea but thats up to you, but lets not go through it all again?