Low salary to myself?

[diesel]

i raised this quesion on another thread

http://forums.contractoruk.com/accou...ome-pay-4.html


As my accountant recommends i get paid (outside IR 35) Directors fee and remaining monies as Divis. But i come across other contractors with different accountants who recommended min. wage and divis. My accountant said Dir' fee and divi is most efficient way to keep tax and NI payments low......but as most of us trying to be on the ball to make sure the advice i get is correct and they are not pushing me into a easy option for them but can put me on HMRC radar.

[QwertyBerty]

That is one accountant's view.
Other accountants views are that you should pay a "reasonable" salary, then dividends. Their view, backed up by unofficial conversations with HMRC inspectors, is that they are less likely to spend huge amounts of time investigating for little gain.

Doesn't this further suggest that one should only ever have short contracts (up to 6 months) at as many different clients as possible in order to avoid becoming a juicy target for IR35 investigation? Once HMRC see they have to trawl through a dozen contracts at a dozen different clients over 5 years, they may be less inclined to proceed.

QB.

[Bumfluff]

...

[dmini]

That is one accountant's view.
Other accountants views are that you should pay a "reasonable" salary, then dividends. Their view, backed up by unofficial conversations with HMRC inspectors, is that they are less likely to spend huge amounts of time investigating for little gain. More potential gain=more effort!

[pmeswani]

Wouldn't hector get suspicious ?

Why would he? You are doing everything legally.

[Mor4]

No the most tax efficent way would be to pay youself bubkiss by way of PAYE.

The tax free allowance has already go so take everything for the rest of this as dividends and nothing as PAYE.

Wouldn't hector get suspicious ?

[Sockpuppet]

Just the dividends plus the minimum amount PAYE and declare it on the self assessment and pay whatever tax I owe.

No the most tax efficent way would be to pay youself bubkiss by way of PAYE.

The tax free allowance has already go so take everything for the rest of this as dividends and nothing as PAYE.

[pmeswani]

What would you pay yourself if your tax-free allocation was already used up before you started your LTD ?

Just the dividends plus the minimum amount PAYE and declare it on the self assessment and pay whatever tax I owe.

[Sockpuppet]

What would you pay yourself if your tax-free allocation was already used up before you started your LTD ?

Bupkiss.

[Mor4]

No. Some Contractors maybe IR35 caught, and therefore are taxed on 95% of their Business income. For those who are not IR35 caught, it is usually good practice for tax efficiency.



Not always... see my comment above. If you are looking to be tax efficient, and are not IR35 caught, it is the best way forward. It is dependant on what your objectives are.



Yes. The less you pay yourself, the less tax you give to HMRC. I pay myself £450 p/m. I could take a further £50+ a month based on my tax code, but would end up paying £200+ a month in NI (Total for Employee and Employer). That £200+ could be used to pay for expenses or extra divi's later on, so I decided not to take the extra £50+.

What would you pay yourself if your tax-free allocation was already used up before you started your LTD ?

[pmeswani]

Hello,

My accountant quoted me a salary firgure that I should take out every month. My question is, is this salary figure, the same across all contractors?

No. Some Contractors maybe IR35 caught, and therefore are taxed on 95% of their Business income. For those who are not IR35 caught, it is usually good practice for tax efficiency.

Is it best to take out a low salary to yourself and get the rest paid in dividends?

Not always... see my comment above. If you are looking to be tax efficient, and are not IR35 caught, it is the best way forward. It is dependant on what your objectives are.

Does the NI/Tax figure that I will have to pay to HMRC, depend on the amount of salary I take out every month?

Many thanks.

Yes. The less you pay yourself, the less tax you give to HMRC. I pay myself £450 p/m. I could take a further £50+ a month based on my tax code, but would end up paying £200+ a month in NI (Total for Employee and Employer). That £200+ could be used to pay for expenses or extra divi's later on, so I decided not to take the extra £50+.

[kellycell]

Hello,

My accountant quoted me a salary firgure that I should take out every month. My question is, is this salary figure, the same across all contractors?

Is it best to take out a low salary to yourself and get the rest paid in dividends?

Does the NI/Tax figure that I will have to pay to HMRC, depend on the amount of salary I take out every month?

Many thanks.