Reply to: New to Limited Company

[andresdrb]

Yes it it 100% legal provided you are not caught by IR35. You need to get professional advice on that.

If you have already taken a salary from a permie job this year and you've been paid over £7,000 already then you shouldn't draw a salary from your company - just take dividends until April 6th next year and then start taking a salary of £7,000 which you can draw tax free though your accountant can advise. If you take £10,000 you will pay more tax than you have to so tell your accountant you'll take no salary this year and £7k the next.



Absolutely right! But don't confuse the tax avoidance you are doing (which is legal) with tax evasion which is illegal. Avoiding tax is doing things like buying a bottle of booze in the duty free, driving a low CO2 emission car or putting your savings into an ISA or pension.

Forget about minimum wage legislation too, that simply doesn't apply to company directors like yourself.

Thanks so much to those that gave really helpful and clarifying answers.

Cheers

[andresdrb]

Sorry to appear a little rude but I would have to question the quality of your research when any guide you find on here and many other sites including an endless number of threads on here all confirm that your account speaketh the truth. In fact I think you would be extremely hard pressed to find evidence that contradicts this.

Either your research is a little flawed or your understanding of the situation is. This process reduces the tax you have to pay legitimately so technically yes you are trying to avoid paying tax you do not have to.

Thanks for the answer, and yes, probably after only 2 months in the country and just 3 weeks as a contractor I still need to catch up with a lot of things, but would be nice to see If you would be catching up that fast with other country laws

[psychocandy]

and to go with you new sofa you have a new title...

Gratz!!!!

Excellent news all round then !!!!

[northernladuk]

Not the best quality stuff I admit. Just wanted a cheap soffa though.

and to go with you new sofa you have a new title...

psychocandy is slower than a 486

Gratz!!!!

[psychocandy]

Buying a sofa on the knock from DFS, I would rather sit on the floor

Not the best quality stuff I admit. Just wanted a cheap soffa though.

[Support Monkey]

This is always a difficult one to answer. Just bought a settee from DFS and the salary question came up.

In the end, couldnt be arsed to explain and just said £7K for salary. Still got the interest-free mind.

Buying a sofa on the knock from DFS, I would rather sit on the floor

[SueEllen]

This is always a difficult one to answer. Just bought a settee from DFS and the salary question came up.

In the end, couldnt be arsed to explain and just said £7K for salary. Still got the interest-free mind.

They most of thought you had assets they could come and strip from your house.

[JamJarST]

This is always a difficult one to answer. Just bought a settee from DFS and the salary question came up.

In the end, couldnt be arsed to explain and just said £7K for salary. Still got the interest-free mind.

No wonder we have a debt crisis!

[psychocandy]

It's a question of what the CC app form asks; does it ask for 'Salary' or 'Income'?

This is always a difficult one to answer. Just bought a settee from DFS and the salary question came up.

In the end, couldnt be arsed to explain and just said £7K for salary. Still got the interest-free mind.

[Wanderer]

my husband has been with an umbrella company in the last 2 months and now plans to move to limited company. If he does that, would getting a minimum salary affect his credit rating in any way? Any thoughts on this ?

Being "self employed" can be a negative thing for your credit rating. If you want a credit card then it may be best to apply for it while your husband is "employed" by the umbrella.

I don't know your personal circumstances but as a self employed person I tend not to have big credit card debts because I'm always scared that I'll lose my job and not be able to pay them off. For me, self employed means I need to be a saver rather than a spender and I'm only happy if I have enough savings to cover at least 6 months worth of living costs should I become unemployed/sick/whatever.

If you have a mortgage then consider moving to a fully flexible one, that's the best way to get credit and smooth out the bumps.

[Clare@InTouch]

I had a question on this minimum wage thing. Will getting a minimum wage affect the credit rating in anyway, like, for eg, when a credit card has to be applied, is there a chance for the bank to come back and say that the salary is too low and we cannot issue a credit card ?? When we thought of applying for a credit card, bank refused saying that there should be a inflow of salary atleast for 3 months. The reason for asking this question is, my husband has been with an umbrella company in the last 2 months and now plans to move to limited company. If he does that, would getting a minimum salary affect his credit rating in any way? Any thoughts on this ?

Your accountant should be able to issue a reference that shows turnover, profit, dividends and salary which is usually enough for most banks. Make sure it's part of the service when you appoint your accountant, some charge extra for such letters.

[stek]

I had a question on this minimum wage thing. Will getting a minimum wage affect the credit rating in anyway, like, for eg, when a credit card has to be applied, is there a chance for the bank to come back and say that the salary is too low and we cannot issue a credit card ?? When we thought of applying for a credit card, bank refused saying that there should be a inflow of salary atleast for 3 months. The reason for asking this question is, my husband has been with an umbrella company in the last 2 months and now plans to move to limited company. If he does that, would getting a minimum salary affect his credit rating in any way? Any thoughts on this ?

It's a question of what the CC app form asks; does it ask for 'Salary' or 'Income'?

[Bumble79]

Yes it it 100% legal provided you are not caught by IR35. You need to get professional advice on that.

If you have already taken a salary from a permie job this year and you've been paid over £7,000 already then you shouldn't draw a salary from your company - just take dividends until April 6th next year and then start taking a salary of £7,000 which you can draw tax free though your accountant can advise. If you take £10,000 you will pay more tax than you have to so tell your accountant you'll take no salary this year and £7k the next.



Absolutely right! But don't confuse the tax avoidance you are doing (which is legal) with tax evasion which is illegal. Avoiding tax is doing things like buying a bottle of booze in the duty free, driving a low CO2 emission car or putting your savings into an ISA or pension.

Forget about minimum wage legislation too, that simply doesn't apply to company directors like yourself.

I had a question on this minimum wage thing. Will getting a minimum wage affect the credit rating in anyway, like, for eg, when a credit card has to be applied, is there a chance for the bank to come back and say that the salary is too low and we cannot issue a credit card ?? When we thought of applying for a credit card, bank refused saying that there should be a inflow of salary atleast for 3 months. The reason for asking this question is, my husband has been with an umbrella company in the last 2 months and now plans to move to limited company. If he does that, would getting a minimum salary affect his credit rating in any way? Any thoughts on this ?

[Wanderer]

My accountant is telling me that I would be safe and 100% legal by paying myself a low salary (10K a year) and pay the rest as dividens to myself every month, since I already got a salary from my previous employer.

Yes it it 100% legal provided you are not caught by IR35. You need to get professional advice on that.

If you have already taken a salary from a permie job this year and you've been paid over £7,000 already then you shouldn't draw a salary from your company - just take dividends until April 6th next year and then start taking a salary of £7,000 which you can draw tax free though your accountant can advise. If you take £10,000 you will pay more tax than you have to so tell your accountant you'll take no salary this year and £7k the next.

Doing my own research, my understanding is that this could be understood as I'm trying to avoid taxes

Absolutely right! But don't confuse the tax avoidance you are doing (which is legal) with tax evasion which is illegal. Avoiding tax is doing things like buying a bottle of booze in the duty free, driving a low CO2 emission car or putting your savings into an ISA or pension.

Forget about minimum wage legislation too, that simply doesn't apply to company directors like yourself.

[northernladuk]

Doing my own research, my understanding is that this could be understood as I'm trying to avoid taxes

Sorry to appear a little rude but I would have to question the quality of your research when any guide you find on here and many other sites including an endless number of threads on here all confirm that your account speaketh the truth. In fact I think you would be extremely hard pressed to find evidence that contradicts this.

Either your research is a little flawed or your understanding of the situation is. This process reduces the tax you have to pay legitimately so technically yes you are trying to avoid paying tax you do not have to.