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Take contractor invoice as PAYE
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Originally posted by MrMarkyMark View PostFTFY
Did you read the other thread (or even just look at who started it)…Maybe we ain’t that young anymoreComment
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Originally posted by WTFH View PostDid you read the other thread (or even just look at who started it)
Unto the breachThe Chunt of Chunts.Comment
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Originally posted by PurpleGorilla View PostTaking 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.
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?Comment
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Are you factoring bench time or just going on straight cash values?'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by smileyface View PostHave I miscalculated somewhere?
£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, PGComment
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Originally posted by PurpleGorilla View PostYes.
£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, PGComment
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Originally posted by PurpleGorilla View PostPs: if you can get a permie £100k job, take it.'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by PurpleGorilla View PostPs: if you can get a permie £100k job, take it."You’re just a bad memory who doesn’t know when to go away" JRComment
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Originally posted by smileyface View PostThanks, 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?
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.Last edited by ASB; 7 December 2015, 20:30.Comment
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