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

[d000hg]

I just can't fathom how a contractor can have less than £16,000 in both personal and company assets? Even on a low rate that's a war-chest < 3 months.

You need £5k+ a month just to pay the bills? And you're criticising others' fiscal arrangements?

[mudskipper]

The system has been designed in such a way that it's possible for self-employed to claim unemployment benefits. I don't think he's milking it, just getting what he's due. We've not bothered claiming child benefit and wouldn't accuse anyone who does of milking the system.

Fair enough, and he's entitled to claim if he wants to, but he does seem to start a number of threads on the topic of how to get as much as possible out of it.

Not to mention that he asked almost the same question a year ago.

http://forums.contractoruk.com/accou...ry-one-go.html

[northernladuk]

Fair enough, and he's entitled to claim if he wants to, but he does seem to start a number of threads on the topic of how to get as much as possible out of it.

Not to mention that he asked almost the same question a year ago.

http://forums.contractoruk.com/accou...ry-one-go.html

And he should really be asking his accountant about his tax affairs. With his wife on board and all this stop starting he's going to have a horrible tax mess that a professional should be dealing with, not us.

[mudskipper]

And he should really be asking his accountant about his tax affairs. With his wife on board and all this stop starting he's going to have a horrible tax mess that a professional should be dealing with, not us.

Yeah, but if he asked his accountant, he wouldn't need to post here and be able to wind everybody up.

[GazCol]

You need £5k+ a month just to pay the bills? And you're criticising others' fiscal arrangements?

A war-chest that can be accrued in 3 months; not to cover 3 months!

But yeah, that yacht and jet don't pay for themselves ;-)

[psychocandy]

To be fair this post was informative rather than asking a question.

And, yes, my accountant knows all about it. all under control and above board.

[psychocandy]

A war-chest that can be accrued in 3 months; not to cover 3 months!

But yeah, that yacht and jet don't pay for themselves ;-)

so £5K+ spare when your in contract. Nice!

Unfortunately, not quite that for me.

[mudskipper]

To be fair this post was informative rather than asking a question.

Ah, OK. I didn't actually read past para 1.

[NorthWestPerm2Contr]

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.

you are seriously not cut out for contracting.