Salary and dividends question.

[stek]

Honestly it's as broad as its long.

It comes down to convienance for you and acct.

I have a Cater Allen Visa debit, and all the transactions are debited (or is it credited, from my accountancy days ISTR banks do it the other way round) individually, so you can go over the 30 transaction limit and that last £1.99 Subway can end up costing you £8.99 with the seven quid charge....

[Jessica@WhiteFieldTax]

I don't know if is against the grain or not.

Honestly it's as broad as its long.

It comes down to convienance for you and acct.

[pmeswani]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

There are no tax implications to the latter at all and no tax implications to the former so long as they are wholly, exclusively and necessarily for business purposes (you'll need to enter these on your tax return and P11D though).

Strange as it may seem, my Accountant has suggested things like accommodation (e.g. hotel stay) and travel (e.g. flights and trains) where it is not something you would normally incur should be paid from the company accounts directly and the receipts (not as a personal expense) are put in accordingly. I don't know if is against the grain or not.

[Contreras]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

I can see the thought process behind this but with respect there is no logic to it. Any of the above could be either paid out-of-pocket and reclaimed, or paid direct by the co. All you are doing by categorising expenses in that way is pandering to the whim of HMRC that certain business costs are a personal benefit.

Debz, You have a choice - it comes down to personal preference and you do not even have to be consistent - just make sure you keep good records!

Personally I would: Introduce capital to whatever the value of shares that issued (say £100) plus a directors loan (say £1k) to cover immediate costs. All expenses paid from the company debit card wherever possible. This keeps company and personal business separate, and the company bank statement itself can count as a record (useful if receipts are ever mislaid/forgotten). The loan can be repaid when cash flow allows, the capital is left in the business.

Others prefer to pay everything out-of-pocket and then reclaim. There is nothing wrong with that either. Do whatever makes sense to you and keep records that you can understand.

As for the best salary/dividends this would depend on personal circumstances including previous salary for the tax year. Ask your accountant to explain their reasoning.

[Debz]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

There are no tax implications to the latter at all and no tax implications to the former so long as they are wholly, exclusively and necessarily for business purposes (you'll need to enter these on your tax return and P11D though).

Thank you TheCyclingProgrammer your straight forward no nonsense answer to my question helped clear up alot!

[TheCyclingProgrammer]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

There are no tax implications to the latter at all and no tax implications to the former so long as they are wholly, exclusively and necessarily for business purposes (you'll need to enter these on your tax return and P11D though).

[Debz]

You lot are funny. Someone's always bumping their gums on this forum.

[stek]

Thank you all for your help - much appreciated.

Northernladuk - though you might say that. Yes I do have an accountant but there's no harm in getting advice from more experienced contractors either who once started out as first time contractors after all thats what forums are for.

Only if you mistrust your accountant, which seems the case here.

[Debz]

Have you signed up.for an accountant yet? They should be your first port of call for all this.

Thank you all for your help - much appreciated.

Northernladuk - though you might say that. Yes I do have an accountant but there's no harm in getting advice from more experienced contractors either who once started out as first time contractors after all thats what forums are for.

[northernladuk]

Have you signed up.for an accountant yet? They should be your first port of call for all this.

[Michael at BI Accountancy]

Just about to start my first contract and wondered how I go about paying for company expenses if my business account has £0. Obviously I would transfer funds from my personal account to the business account - would this be classed as a directors loan and then I would pay it back to my personal account once I have funds? Are there any tax implications by using this method?

Based on being outside IR35 I have been advised of taking the minimum salary of the following:

£8,060 per annum, which would mean you wouldn’t pay any NI or income tax if your tax code was above 859L.
£10,600 per annum, which would mean you would pay NI but not income tax if your tax was 1060L. The benefit is you would make an additional £200 from this salary each year, but have the added burden of making quarterly payments to HMRC.

I do not yet have my P45 as my umbrella company have informed me it will take a month to come. My question is if the basic personal allowance is £10,600 and Im sure my tax code is 1060L then why have I been advised to take the salary of £8060 per annum?

Thanks in advance!

Hi Debz,

For the expenses you can either pay money into the company (Capital introduced) or as stek says pay for them personally and reclaim the amount once you have funds in the company to do so.

As for the salary, £8,060 is the amount you can pay before NI kicks in. The personal allowance is the amount you can earn before you have to pay (PAYE)Tax.

You will however have to take into account how much you have already received in the tax year(P45).

As for the quarterly payments, you will only tend to have to make one payment in April. Due to directors being taxed differently to a standard employee.

Hope this helps.

Michael at BI Accountancy

[PurpleGorilla]

Float the account with a director loan and pay it back when funds allow. As long as not faffing with interest earned and just pay it back it is a non issue. Keep it clean, pay as much as poss from your biz account (as long as the expenses are legit).

[stek]

Pay for them personally and claim back from Ltd when funds permit.

[Debz]

Just about to start my first contract and wondered how I go about paying for company expenses if my business account has £0. Obviously I would transfer funds from my personal account to the business account - would this be classed as a directors loan and then I would pay it back to my personal account once I have funds? Are there any tax implications by using this method?

Based on being outside IR35 I have been advised of taking the minimum salary of the following:

£8,060 per annum, which would mean you wouldn’t pay any NI or income tax if your tax code was above 859L.
£10,600 per annum, which would mean you would pay NI but not income tax if your tax was 1060L. The benefit is you would make an additional £200 from this salary each year, but have the added burden of making quarterly payments to HMRC.

I do not yet have my P45 as my umbrella company have informed me it will take a month to come. My question is if the basic personal allowance is £10,600 and Im sure my tax code is 1060L then why have I been advised to take the salary of £8060 per annum?

Thanks in advance!