Take contractor invoice as PAYE

[MrMarkyMark]

FTFY

I'm sure I saw a sensible thread on here about corporation tax that will just confuse you even more...

[WTFH]

FTFY

Did you read the other thread (or even just look at who started it)

[MrMarkyMark]

Did you read the other thread (or even just look at who started it)

ballcocks.

Unto the breach

[smileyface]

Taking it all as salary is tax inefficient. You will pay high rate tax on a big chunk, which is a lot more than CT. Speak to an accountant for the best strategy with you circumstances.

Ps: £100k p/a is perfectly reasonable.

Thanks, I agree.

Here are my thoughts;

As I understand, from April 2016, the first £5K of dividends is not taxed. After that, the next £28K approx. is taxed at 7.5% and then the rest at £32.5%.

So with £100K, if I take £10K as salary and another £10K as expenses, that leaves £80K. Corp tax is at 20%, so 0.8 * £80K = £64K.

First £5K of div is tax free, next £28K is taxed at 7.5%, remaining £31K is taxed at 32.5%.

So IF I were to take the £64 as dividends, I end up with: £5K + £25.9K + £20.925K = £51.825K.

Even if I add my £10K as salary and £10K as expenses, I only end up with £71.825K, ie not mch better than PAYE.

Have I miscalculated somewhere?

[northernladuk]

Are you factoring bench time or just going on straight cash values?

[PurpleGorilla]

Have I miscalculated somewhere?

Yes.

£100k salary is rare as rocking horse tulip.

£100k contract £450ish/day is common.

Maybe think about comparing a £70k salary with a £100k contract.

HTH, PG

[PurpleGorilla]

Yes.

£100k salary is rare as rocking horse tulip.

£100k contract £450ish/day is common.

Maybe think about comparing a £70k salary with a £100k contract.

HTH, PG

Ps: if you can get a permie £100k job, take it.

[northernladuk]

Ps: if you can get a permie £100k job, take it.

I'd be thinking hard about the 70k job up here!!

[SueEllen]

Ps: if you can get a permie £100k job, take it.

Then you are open to performance reviews and sh*t.

[ASB]

Thanks, I agree.

Here are my thoughts;

As I understand, from April 2016, the first £5K of dividends is not taxed. After that, the next £28K approx. is taxed at 7.5% and then the rest at £32.5%.

So with £100K, if I take £10K as salary and another £10K as expenses, that leaves £80K. Corp tax is at 20%, so 0.8 * £80K = £64K.

First £5K of div is tax free, next £28K is taxed at 7.5%, remaining £31K is taxed at 32.5%.

So IF I were to take the £64 as dividends, I end up with: £5K + £25.9K + £20.925K = £51.825K.

Even if I add my £10K as salary and £10K as expenses, I only end up with £71.825K, ie not mch better than PAYE.

Have I miscalculated somewhere?

So, on the assumption that you have 100k of billings and zero costs then there is a gross profit of 100k. If this were all taken as salary then this is a gross salary of 88,850 + Er's NI 11,141 giving a net post tax salary of 58,858.

If the contract is within IR35 then your are pretty much stuck with this or something similar (save for taking pensions).

Obviously you can't just "take" 10k as expenses. They have to be incurred, but let's assume they are.

As you surmise this will leave approx 64k for dividends. Except it won't quite.

10k salary costs 260 in EE's NI and 232 in ER's. So it leaves 9,740 in your pocket and actually will leave

100,000 - 10,000 - 10,260 = 79740 x .8 = 63792.

Now, first thing you need to do is gross it up for the nominal 10% tax credit ( x 10/9) = 70880

Currently:

600 = 0 (balance of personal allowance)
31785 = 0 (basic rate band)
38495 @ 22.5 = 8661.38 (allowing for the tax credit)

Total yield = 9,740 + 63,792 - 8662 = 64,870. +10k exps = 74,870

Obviously this is comfortably ahead of the 100k salary route of 59,000. (But really you should calculate based on a 90 gross including Er's NI to compare like with like -this would be 53,750 appx+ 10k = 63,750)

In any event you arecomparing 53,750 to 64,870. You may or may not regard that as significant.

[strike]With the advent of thenew dividend tax, who knows ? But it seems likely there will be further additional tax of 31,785 - 5,000 x 7.5% = 2,000 tax to pay extra. So this brings it a bit clearer; but still usefully better off.[/strike]

Of course whether or not simply ensuring everything in the company pot ends up immediately in your hands may not be prudent.

And I could have gone wrong in my calculations.

edit: you can of course fill in a "dummy" tax return in your self assessmentaccount and not submit it to play around with numbers.

edit: No I think that is complete tosh for next year.