Salary from end of June until April 2012

[jamesc77]

I know you are new to this but I note you're straight in there talking about low salary and dividends, but no mention of IR35, just a thought !!

Robot

Thanks for all the help. Looks like I'm looking for an accountant

[Taxless]

This is what my accountant has suggested. Because I've already used up my allowances, then there's no gain to be had in salary.

Like you said, if I kept the weekly amount below the level, I wouldnt pay NI, but would pay normal tax. Whereas if paid it out in dividends I'd pay same rate in CT.

Is this right? Yeh, I know my accountant says this but I like to understand myself.

Yes, unless the company had profits over £300k when higher rates apply for CT, but I am guessing this is unlikely!

You also have a slight cash flow advantage as any PAYE would be paid monthly as you go, whereas the CT is not paid until 9 months after the end of the company's accounting period.

[psychocandy]

Yes, directors NIC is different, because under normal rules, they have power to decide when to take salary and thus, when and how to incur nic. The hmrc guidance is here :

http://www.hmrc.gov.uk/nitables/ca44.pdf

You have a new employment, so PAYE is based on annual income, but NIC is based on the new employment, so chance to minimise income and restrict NIC exposure.

"I guess there's no point doing this though since personal would be same as CT, since I might as well just pay myself dividends".

Depends on what income you need out of the company and what the company's marginal tax rate will be, but generally, yes it's neutral.

aAsk your accountant.

This is what my accountant has suggested. Because I've already used up my allowances, then there's no gain to be had in salary.

Like you said, if I kept the weekly amount below the level, I wouldnt pay NI, but would pay normal tax. Whereas if paid it out in dividends I'd pay same rate in CT.

Is this right? Yeh, I know my accountant says this but I like to understand myself.

[Taxless]

I'm in a similar position except I had a PILON payment of £15K from my last employer in April.

My accountant did initially tell me to pay myself £590 a month, until I told him about this.

I guess because my earnings are already above the no tax limit for this year, then I'd pay both tax and NI on any salary I paid myself? Right?

Although, if I paid myself £590, would I just pay tax but no NI (because its below weekly limit)?

I guess theres no point doing this though since personal would be same as CT, since I might as well just pay myself dividents (which is what accountant has recommende).

Yes, directors NIC is different, because under normal rules, they have power to decide when to take salary and thus, when and how to incur nic. The hmrc guidance is here :

http://www.hmrc.gov.uk/nitables/ca44.pdf

You have a new employment, so PAYE is based on annual income, but NIC is based on the new employment, so chance to minimise income and restrict NIC exposure.

"I guess there's no point doing this though since personal would be same as CT, since I might as well just pay myself dividends".

Depends on what income you need out of the company and what the company's marginal tax rate will be, but generally, yes it's neutral.

aAsk your accountant.

[psychocandy]

Please be patient I'm new to this and have not found the exact answer I'm after elsewhere on the forum.
I have just set up my own Ltd company I have set up PAYE, Flat rate VAT, Corp Tax and I'm using freeagent for my accounting.
The plan is, at the end of June when the first invoices have been paid to the company, to pay myself a small salary and dividends.
Others on the forum say they pay themselves approx £589 per month x 12 = £7068 to cover NI. But I'm only starting to pay myself at the end of June. So therefore can I divide £7068 by 10 months (is that the correct amount of months to the end of the financial year). So I pay myself £706.80 per month until April 2012?
I have been unemployed from Feb 2011 until the end of May when I started the company.

Thanks

I'm in a similar position except I had a PILON payment of £15K from my last employer in April.

My accountant did initially tell me to pay myself £590 a month, until I told him about this.

I guess because my earnings are already above the no tax limit for this year, then I'd pay both tax and NI on any salary I paid myself? Right?

Although, if I paid myself £590, would I just pay tax but no NI (because its below weekly limit)?

I guess theres no point doing this though since personal would be same as CT, since I might as well just pay myself dividents (which is what accountant has recommende).

[Robot]

Please be patient I'm new to this and have not found the exact answer I'm after elsewhere on the forum.
I have just set up my own Ltd company I have set up PAYE, Flat rate VAT, Corp Tax and I'm using freeagent for my accounting.
Thanks

I know you are new to this but I note you're straight in there talking about low salary and dividends, but no mention of IR35, just a thought !!

Robot

[Danielsjdaccountancy]

I'm not sure myself if Freeagent allows the different methods of calculating NI. But if the Director's method is not used then jamesc77 could be missing out an a tax saving by not being able to pay salary up to the full £7,072 without incurring NI.

Assuming of course, the personal circumstances determine this to be the most tax efficient level which on the limit information avaliable seems to be the case.

Martin

Have to agree with Martin here, there are special rules for Directors.

[Martin at NixonWilliams]

As far as I'm aware Freeagent is not capable of using different methods (happy to be corrected if that's wrong...?)

You could calculate it outside Freeagent and then manually adjust each payslip, it depends how complicated you want to be!

I'm not sure myself if Freeagent allows the different methods of calculating NI. But if the Director's method is not used then jamesc77 could be missing out an a tax saving by not being able to pay salary up to the full £7,072 without incurring NI.

Assuming of course, the personal circumstances determine this to be the most tax efficient level which on the limit information avaliable seems to be the case.

Martin

[Clare@InTouch]

But surely if the employee is also a Director they can operate on the Director's NI rules and as such the £7,072 (reduced if they only became a Director part way through the tax year) applies annually.

So, in the example above the £7,072 could be split over the months of June 11 - March 12 @ £707.20 per month with no NI liability. Again, this assumes the directorship has been held since prior to 6th April 2011.

Martin

As far as I'm aware Freeagent is not capable of using different methods (happy to be corrected if that's wrong...?)

You could calculate it outside Freeagent and then manually adjust each payslip, it depends how complicated you want to be!

[Martin at NixonWilliams]

Because of the way NI is calculated it will kick in when your monthly earnings in any month, regardless of whether you've not earned anything in a prior month, go over £589. It's not as simple as splitting the annual allowance over the months available when you're looking at less than a full 12 months (as Tanya rightly says the NI limit is calculated weekly).

Play around with Freeagent and the salary calculator should be able to show you the results of different levels.

But surely if the employee is also a Director they can operate on the Director's NI rules and as such the £7,072 (reduced if they only became a Director part way through the tax year) applies annually.

So, in the example above the £7,072 could be split over the months of June 11 - March 12 @ £707.20 per month with no NI liability. Again, this assumes the directorship has been held since prior to 6th April 2011.

Martin

[Clare@InTouch]

But surely thats over a full 12 months? I'm only talking about paying over 10 ?

Because of the way NI is calculated it will kick in when your monthly earnings in any month, regardless of whether you've not earned anything in a prior month, go over £589. It's not as simple as splitting the annual allowance over the months available when you're looking at less than a full 12 months (as Tanya rightly says the NI limit is calculated weekly).

Play around with Freeagent and the salary calculator should be able to show you the results of different levels.

It is the same, the tax free allowance/ the threshold is set in WEEKLY basis

But surely thats over a full 12 months? I'm only talking about paying over 10 ?

[jamesc77]

Normally we suggest custsomers to pay 602 or less for salary. More than that you could be liable for taxa nd NIC

You need to be quite careful when recording on freeganet

Thanks

But surely thats over a full 12 months? I'm only talking about paying over 10 ?

Normally we suggest custsomers to pay 602 or less for salary. More than that you could be liable for taxa nd NIC

You need to be quite careful when recording on freeganet

Thanks

Please be patient I'm new to this and have not found the exact answer I'm after elsewhere on the forum.
I have just set up my own Ltd company I have set up PAYE, Flat rate VAT, Corp Tax and I'm using freeagent for my accounting.
The plan is, at the end of June when the first invoices have been paid to the company, to pay myself a small salary and dividends.
Others on the forum say they pay themselves approx £589 per month x 12 = £7068 to cover NI. But I'm only starting to pay myself at the end of June. So therefore can I divide £7068 by 10 months (is that the correct amount of months to the end of the financial year). So I pay myself £706.80 per month?
I have been unemployed from Feb 2011 until the end of May when I started the company.

Thanks

[jamesc77]

Please be patient I'm new to this and have not found the exact answer I'm after elsewhere on the forum.
I have just set up my own Ltd company I have set up PAYE, Flat rate VAT, Corp Tax and I'm using freeagent for my accounting.
The plan is, at the end of June when the first invoices have been paid to the company, to pay myself a small salary and dividends.
Others on the forum say they pay themselves approx £589 per month x 12 = £7068 to cover NI. But I'm only starting to pay myself at the end of June. So therefore can I divide £7068 by 10 months (is that the correct amount of months to the end of the financial year). So I pay myself £706.80 per month until April 2012?
I have been unemployed from Feb 2011 until the end of May when I started the company.

Thanks