Reply to: Tax efficient salary for 2015/16

[dagenheis]

Re Directors NI - you can elect to run it using the 'Alternative Method' to smooth it over the year so you do pay 4 quarterly amounts instead of one lump sum. Most payroll software should allow you to do this, we tend to do this for clients we manage the payroll for so they have the NI spread over the year instead of being hit at the end of the year.

Also we have written an article below on the optimal salary and dividend levels for 15-16:

What is the best mix of salary and dividends for 2015/16 ?

Is net affect the same for the option 1 if the 963 is paid for 11 months (May-March) rather than 863 for 12 months (Apr-March)? So the total salary for the year is below 10593 (below 10600).

[jffinancial]

re

thanks for the feedback, glad the article was useful :-)

[ittony]

Also we have written an article below on the optimal salary and dividend levels for 15-16:

What is the best mix of salary and dividends for 2015/16 ?

That's great, thanks. Wish I'd started reading this thread back to front now.

Can anyone confirm, if take the £671 route for a quiet life (running my own payroll with HMRC RTI) and later decide that the £883 option would have been worth it after all, would there be any harm in adjusting the pay in the last three months to make up the difference? Or if I did it the other way round, starting on £883 and changing in favor of £671 a month equivalent.

[asingh]

Also we have written an article below on the optimal salary and dividend levels for 15-16:

What is the best mix of salary and dividends for 2015/16 ?

Thank you for that. Really useful

[Sausage Surprise]

Yes you do if you want to use the employment allowance. Ask them.

Well I'm not so I won't

[PerfectStorm]

Also we have written an article below on the optimal salary and dividend levels for 15-16:

What is the best mix of salary and dividends for 2015/16 ?

Well written, thank you

[jffinancial]

NI

Re Directors NI - you can elect to run it using the 'Alternative Method' to smooth it over the year so you do pay 4 quarterly amounts instead of one lump sum. Most payroll software should allow you to do this, we tend to do this for clients we manage the payroll for so they have the NI spread over the year instead of being hit at the end of the year.

Also we have written an article below on the optimal salary and dividend levels for 15-16:

What is the best mix of salary and dividends for 2015/16 ?

[PerfectStorm]

Certainly, you may want to put yourself in the position of a less well-informed client. However, I think your points are better directed towards the services being provided by the accountant (and this isn't directed at you, I'm just making a general counterpoint). Most accountants - and I can certainly speak for mine - should be able to provide simple payment instructions with the appropriate reference number at the appropriate time. It literally requires less than 5 minutes of my time.

This has been my experience. Nixon Williams say how much to pay and I pay it. Once it's been done once I can do it again - changing amounts and references - with an iPhone app taking about 20 seconds per transaction. But I can understand some people not wanting to have anything to do with it.

[AnotherGuy]

Thanks for putting me onto this. Yet again I have been misinformed by my accountant. I had been paying my dues quarterly and wondered why my online account with HMRC was showing such a large surplus!

Related to this, do you guys have access to HMRC online accounts?

I think my accountant has control over this, and created all the online accounts (VAT and enverything) meaning I don't know the credentials. Not sure if I should be concerned about this, might be a common thing but I'd like to have control

[jamesbrown]

What you say is correct...and I'm not really arguing with you, but some clients will see it from a different perspective.

Eg they set up a monthly standing order for their salary, £883...all fine, but then they end up with a director loan at the end as they didn't tweak it downwards. They've also got to pay the deductions over...is it to the CT office with their UTR, or the VAT office with VAT number...perhaps as it's a deduction from salary it goes to the personal tax dept? No, an entirely different place, with a reference they won't use for anything else.

So yes, I agree it's not hard, but it is an extra faff that can easily be completely avoided. Depends on how comfortable you are with admin/how well you understand your tax affairs, and if you're not particularly hot on that stuff, how you value your time vs cash.

Certainly, you may want to put yourself in the position of a less well-informed client. However, I think your points are better directed towards the services being provided by the accountant (and this isn't directed at you, I'm just making a general counterpoint). Most accountants - and I can certainly speak for mine - should be able to provide simple payment instructions with the appropriate reference number at the appropriate time. It literally requires less than 5 minutes of my time.

[Maslins]

Again, it's important to emphasise that the hassle of making a single PAYE payment in Q4 is absolutely minimal. If you have an accountant (and you should have), this amounts to no more effort that logging into your online banking and making a single payment to HMRC at year end. That minimal effort will save around 200 quid in total, not per month (i.e. using the Employment Allowance and paying up to the personal allowance). I am talking about the baseline case (1060L taxcode etc.). YMMV.

What you say is correct...and I'm not really arguing with you, but some clients will see it from a different perspective.

Eg they set up a monthly standing order for their salary, £883...all fine, but then they end up with a director loan at the end as they didn't tweak it downwards. They've also got to pay the deductions over...is it to the CT office with their UTR, or the VAT office with VAT number...perhaps as it's a deduction from salary it goes to the personal tax dept? No, an entirely different place, with a reference they won't use for anything else.

So yes, I agree it's not hard, but it is an extra faff that can easily be completely avoided. Depends on how comfortable you are with admin/how well you understand your tax affairs, and if you're not particularly hot on that stuff, how you value your time vs cash.

[7specialgems]

Director's NI is calculated differently.

Thanks for putting me onto this. Yet again I have been misinformed by my accountant. I had been paying my dues quarterly and wondered why my online account with HMRC was showing such a large surplus!

[TheCyclingProgrammer]

If the full allowance salary attracts £340.80 of EmployEE NI per year and payments on account are due quarterly on accruals reported via FPS monthly, how is it that there is a single Q4 payment of £340.80 and not four payments of £85.20?

Director's NI is calculated differently.

[7specialgems]

Again, it's important to emphasise that the hassle of making a single PAYE payment in Q4 is absolutely minimal. If you have an accountant (and you should have), this amounts to no more effort that logging into your online banking and making a single payment to HMRC at year end. That minimal effort will save around 200 quid in total, not per month (i.e. using the Employment Allowance and paying up to the personal allowance). I am talking about the baseline case (1060L taxcode etc.). YMMV.

If the full allowance salary attracts £340.80 of EmployEE NI per year and payments on account are due quarterly on accruals reported via FPS monthly, how is it that there is a single Q4 payment of £340.80 and not four payments of £85.20?

[jamesbrown]

Again, it's important to emphasise that the hassle of making a single PAYE payment in Q4 is absolutely minimal. If you have an accountant (and you should have), this amounts to no more effort that logging into your online banking and making a single payment to HMRC at year end. That minimal effort will save around 200 quid in total, not per month (i.e. using the Employment Allowance and paying up to the personal allowance). I am talking about the baseline case (1060L taxcode etc.). YMMV.