Reply to: Salary for 2020/2021

[northernladuk]

What does your accountant say?

As least I've got one.

[abz2020]

Is husband and wife really a two employee company?

What does your accountant say?

[northernladuk]

We did (and still do) that with 2 employee companies (eg H&W) and the employment allowance. Quite often when we give clients a choice the response is along the lines of "just tell me what's best". People active on this forum will be skewed towards the "I take an interest and want to understand" end of the market. Many aren't interested and consider that they pay us to weigh up these things and tell them what's best to do. Of course that applies mainly when it's something with just £50 at stake than something much more significant.

Is husband and wife really a two employee company?

[Maslins]

If only your clients were smart enough to hold two thoughts in their mind at once, you could offer them an "easiest" option that costs £50 and a "cheapest" option that saves them £50 but makes them make an extra payment. And let them decide which they like.

We did (and still do) that with 2 employee companies (eg H&W) and the employment allowance. Quite often when we give clients a choice the response is along the lines of "just tell me what's best". People active on this forum will be skewed towards the "I take an interest and want to understand" end of the market. Many aren't interested and consider that they pay us to weigh up these things and tell them what's best to do. Of course that applies mainly when it's something with just £50 at stake than something much more significant.

[WordIsBond]

On the whole I agree with this. The overall tax difference between ~£8,784 and ~£9,500 is very modest, and the latter will require the small hassle of an additional payment to HMRC not required for the typical client opting for the former. Hence why it wasn't an obvious choice and we debated internally. In the end we feltb slightly bigger risk of clients being annoyed if they felt we'd taken the lazy option and cost them ~£50, than being annoyed about having to make an extra payment that we'd highlight to them in ~13 months time.

If only your clients were smart enough to hold two thoughts in their mind at once, you could offer them an "easiest" option that costs £50 and a "cheapest" option that saves them £50 but makes them make an extra payment. And let them decide which they like.

This business consulting advice has been offered at no charge, to give your company an idea of the services WIB Business Consulting can offer. However, if you believe WIB Business Consulting even exists, you are too gullible to be our client.

[WordIsBond]

Who really cares though? We're talking pennies here?

Indeed. But accountants really are supposed to get the pennies right, so to say something is optimum when it isn't is not great advertising.

For me it's obvious which way to go because I have employees so we have to make those HMRC / PAYE payments anyway. So might as well grab that extra £50 for my wife and me. Combine it and we can have a nice evening out next March, if any of the places we want to go are still in business after coronavirus.

[BrilloPad]

apart from GAAR makes some avoidance illegal as well. It's no longer as clear cut.

Indeed. We are all expected to pay our "fair" share....

[Chart Accountancy]

We recommend £791 salary to our clients with 1 director on the payroll for 2020/21. It is most tax efficient and yes it will require a small payment of Employer's NIC after the end of the tax year.

[Lance]

Ah - the difference between tax evasion (illegal) and tax avoidance ...

apart from GAAR makes some avoidance illegal as well. It's no longer as clear cut.

[CatOnMat]

Tax dodgers!

Ah - the difference between tax evasion (illegal) and tax avoidance ...

[Mephisto]

Tax dodgers!

[Maslins]

Who really cares though? We're talking pennies here?

On the whole I agree with this. The overall tax difference between ~£8,784 and ~£9,500 is very modest, and the latter will require the small hassle of an additional payment to HMRC not required for the typical client opting for the former. Hence why it wasn't an obvious choice and we debated internally. In the end we feltb slightly bigger risk of clients being annoyed if they felt we'd taken the lazy option and cost them ~£50, than being annoyed about having to make an extra payment that we'd highlight to them in ~13 months time.

[genius]

Who really cares though? We're talking pennies here?

[WordIsBond]

£8,760

Optimum Director Salary and Dividends 2020/21 – Limited Company Directors - JF Financial

They are mostly wrong.

If you pay the additional £740 to get to £9500, you pay 13.8% employer NI but save 19% Corporation Tax. It means you pay a little more tax personally but your company will have extra money to pay you dividends that more than make up for it.

[genius]

£8,760

Optimum Director Salary and Dividends 2020/21 – Limited Company Directors - JF Financial