Reply to: Best to pay no salary?

[lucyclarityumbrella]

£60K is the max you can put into a pension and still get tax relief on it - used to be £40k

Unless you have carry over from previous years you can factor into it?

just seen that had been covered!

[ensignia]

I'm kind of in the same boat, I haven't paid myself a salary in 24/25, but I'm thinking perhaps I should. Corp tax is gonna be a big old amount and it'd be good to get it down slightly. I've only taken about 15k in dividends as well.

I plan to MVL and take advantage of the 14% BADR rate before it increases and it seems to make sense to leave as much money in the company coffers as possible.

[css_jay99]

Either way, HMRC get their ~ 20%......

Damn, the house always wins.

I wonder why this affect us mere mortals while billionaires moonwalk out of these traps

[Andy2022]

Well you aren't paying employer NI because with an employee you get the £10,000 allowance so paying yourself £50,000 is very simple.

Ok with you… so using the Employment Allowance you can have a combined salary of £80k between two employees and as it’s salary CT due will decrease

Assuming 2 employees

EA = 10,500
NI = 15%

10,500 / 0.15 = 70,000

70,000 + 2 x 5,000 = 80,000 (employers NI not due on first 5,000 and assuming 2 employees)

[eek]

Got an example?

Well you aren't paying employer NI because with an employee you get the £10,000 allowance so paying yourself £50,000 is very simple.

[Andy2022]

Got to say I'm looking forward to the advice for 2025/6 - because every calculation I've seen says that if you have 1 other employee it's better to pay yourself via PAYE.

Got an example?

[eek]

Got to say I'm looking forward to the advice for 2025/6 - because every calculation I've seen says that if you have 1 other employee it's better to pay yourself via PAYE.

[WTFH]

Nah - real contractors max it out every year so not a factor

Real contractors have accountants.

[Olly]

Have you factored in carry forward rules?

Nah - real contractors max it out every year so not a factor

[Craig@Clarity]

£60K is the max you can put into a pension and still get tax relief on it - used to be £40k

Have you factored in carry forward rules?

[Craig@Clarity]

Thanks but why aren't you factoring in employers NI?

There are other things to think about including employees and employer's NI, LEL, primary and secondary thresholds, employment allowance, CT marginal rate etc. A lot of assumptions and scenario's but since we're in a forum, I thought I would be helpful and give some general advice.....

[Olly]

Is the 60k a threshold so max amount or an amount you've chosen based on the money you've got?

£60K is the max you can put into a pension and still get tax relief on it - used to be £40k

[northernladuk]

how do you mean?

Is the 60k a threshold so max amount or an amount you've chosen based on the money you've got?

[Olly]

Obvs can't tell you what salary to pay yourself but here's something to think about.

You get a personal allowance of £12.5k. Say, for example, you pay or don't pay yourself £12.5k salary. If you don't pay a salary from your company, your profit would be £12.5k higher which means you would pay 19% CT. If you pay yourself £12.5k salary, your company profit is lower by £12.5k meaning you've saved yourself 19% on £12.5k.

In a different scenario, if you've already used up your personal allowance from other income, what if you paid or don't pay yourself £9k from your company. If you don't pay £9k salary, then profits are higher and you pay 19% CT. If you do pay a salary of £9k, you save 19% CT but you pay income tax at 20% on the £9k. Either way, HMRC get their ~ 20%......

Thanks but why aren't you factoring in employers NI?

[Craig@Clarity]

Obvs can't tell you what salary to pay yourself but here's something to think about.

You get a personal allowance of £12.5k. Say, for example, you pay or don't pay yourself £12.5k salary. If you don't pay a salary from your company, your profit would be £12.5k higher which means you would pay 19% CT. If you pay yourself £12.5k salary, your company profit is lower by £12.5k meaning you've saved yourself 19% on £12.5k.

In a different scenario, if you've already used up your personal allowance from other income, what if you paid or don't pay yourself £9k from your company. If you don't pay £9k salary, then profits are higher and you pay 19% CT. If you do pay a salary of £9k, you save 19% CT but you pay income tax at 20% on the £9k. Either way, HMRC get their ~ 20%......