Reply to: Maximise take home pay

[Dow Jones]

Dumb posts

I wish we had more posters of the same calibre and knowledge as mal.
I have personally learnt a lot from his advice on various matters and I have had MyCo since 1994.
Nobody is perfect but he is always very close.
He is right to be annoyed by idiots.
How can anyone suggest that one way of maxing their profits is to shut the company every 2 years? WTF?
Also, 90% of qns asked have been previously dealt a few days/weeks before, so all the poster has to do is to perform a few searches and/or look at the links.
I find this as a general symptom of sloppiness and laziness which has lately prevailed in IT. Same as giving someone a 50 page spec document to read and comes back to ask if you could point him to the exact page!!

[SueEllen]

Is it unreasonable to ask that people read the FAQs, guides, and stickies before asking questions?

Apparently from the amount of threads asking the same questions-

YES

[expat]

... What I am is short with people who have clearly done no preparatory reading or research before crashing in with questions to which the answer is known or self-evident. And the logic behind that is that if you have to be spoon-fed at that level, you may just be in the wrong job.

Is it unreasonable to ask that people read the FAQs, guides, and stickies before asking questions?

[malvolio]

...or both...?

Malvolio is not me, nor anything very much like me, to be honest. He started off as an experiment in building a very non-me persona and I kind of got stuck with him. And he is quite fun in a Frankensteinian kind of way.

As for newby-flaming - I absolutely do not do that. What I am is short with people who have clearly done no preparatory reading or research before crashing in with questions to which the answer is known or self-evident. And the logic behind that is that if you have to be spoon-fed at that level, you may just be in the wrong job.

And unlike The Puma and other professionals, whose knowledge and wisdom I respect greatly, I am no expert in any of the various disciplines, I just try to illustrate the real world to those who may not have had as many chances as me to observe it in operation.

[BrilloPad]

when he feels like it.

Judging from the amount of flaming - either we get alot of newbies or Mal is married...

[NotAllThere]

IMO Mal is one of the best posters on here - he has some great insights. And is only rude where it is justified.

when he feels like it.

[BrilloPad]

Ignore him. It was a perfectly sensible question. The only answers you'll get out of him will be rude and/or wrong.

IMO Mal is one of the best posters on here - he has some great insights. And is only rude where it is justified.

[max]

Hi,

I'm a contracting newbie. I have a limited company with me as sole director and sole employee. I've been told the best way to run my limited company is to have a low salary (£10k), then take the rest as dividends. But taking dividends over £26k in a tax year incurs 25% tax, which is BAD! So anything over £26k should be left in the company. The company is then closed every 2 years and you apply for entrepreneur's relief through capital gains. This only incurs 0-6% (depending on circumstances).

Is this the best way to run a company? Are there any other ways to maximise take home pay? Also, doing things this way means I can only take £10k + £26k a year. How can I take more out of the company if I need it?

Thanks

Your strategy is pretty much sound, likely to be legal, although HMRC will hate you....they would prefer a blanket 60% of your revenue.

Your specific numbers will depend on your situation, ie: other income, like dividends, interest or rental income. It might be useful setting up spreadsheet to tweak the numbers.

[NotAllThere]

H
patricktroughton - ask whatever you want to - asking questions is the best way to learn.

Patricktroughton - do try to show that you've done a bit of research, and have applied some thought before asking questions. Otherwise, expect some flaming in proportion to the basicness/stupidity of the question...

[NotAllThere]

Hi,

I'm a contracting newbie. I have a limited company with me as sole director and sole employee. I've been told the best way to run my limited company is to have a low salary (£10k), then take the rest as dividends. But taking dividends over £26k in a tax year incurs 25% tax, which is BAD! So anything over £26k should be left in the company. The company is then closed every 2 years and you apply for entrepreneur's relief through capital gains. This only incurs 0-6% (depending on circumstances).

Is this the best way to run a company? Are there any other ways to maximise take home pay? Also, doing things this way means I can only take £10k + £26k a year. How can I take more out of the company if I need it?

Thanks

The best way - "the most tax efficient way" - not necessarily how you should run it for your requirements.. The bit emboldened is really dumb. If you want more money, take it out of the company AND PAY THE EXTRA TAX.

There. That wasn't difficult, was it?

[malvolio]

Only if we assume my own accountant has been incorrectly completing them on my behalf? I went back to check the detail and find he has always treated it as a BIK. Which is a good illustration of why even fairly well-informed people need professional backup to get the little things right.

[QwertyBerty]

I'm intolerant of people asking questions out of ignorance

Why else would someone ask a question?

QB.

[THEPUMA]

On the other hand we have a community of contractors who spend half their working life trying not to be painted as tax-evading unethical cheats by HMRC and who are facing constant and increasingly desparate attacks on their chosen way of working - a way, incidetnally, that is key to UK PLC's economic well-being.

Can we assume therefore that you have amended your incorrect P11Ds and tax returns following our recent exchange where you admitted you had submitted them incorrectly?

[malvolio]

Ignore him. It was a perfectly sensible question. The only answers you'll get out of him will be rude and/or wrong.

Rude? OK, I'm intolerant of people asking questions out of ignorance. I've said many times that contracting is a serious career choice and you ned to do the research before you start. More than a few of the regulars agree with me on that.

Wrong? Not that often, actually. And I'm happy to admit it when I am.

My point - albeit roughly expressed - is that here we have someone who has a partialy informed understanding of how contracing and tax works asking about how to use company closure as a tax avoidance scheme (something that is very clearly explained on one of the websites he would be reading had he taken my advice to read the guides, incidetnally, including a short discourse on why it's a bad idea).

On the other hand we have a community of contractors who spend half their working life trying not to be painted as tax-evading unethical cheats by HMRC and who are facing constant and increasingly desparate attacks on their chosen way of working - a way, incidetnally, that is key to UK PLC's economic well-being.

So sorry if I get shirty with stupid people who can't do the research and who perpetuate a damaging myth, but I'm more leopard than puma...

[original PM]

careful

if you cannot prove you are acting a s ltd company (e.g. you have 1 job and 1 place of work and are solely using your ltd company as a means of avoiding tax) then paying yourself a salary too low (e.g. not in line with market value) may bring HMRC knocking

although if your turnover is not that much you should be okay.