Reply to: With increase in allowances whats best base salary for next year?

[LisaContractorUmbrella]

HM Revenue & Customs: Rates and thresholds for employers

HTH

[Fandango]

Does this value change if you take childcare vouchers from your company, not sure if this is deemed salary sacrifice and therefore best figure would be allowance + value of vouchers for the year?

is anyone able to advise on this?

thanks

[minstrel]

I currently pay £10kpa (badly advised by old accountant).

My new accountant has recommended that I change to the £7605 as quoted by some of your guys.

But I'm worried that this drop could open me up to investigation by HMRC (I'm Ltd and don't use any schemes).

Do you have any thoughts on this or am I just being paranoid?

I don't think there is any evidence to suggest an increased risk. Also, nothing really to worry about with an HMRC investigation if you are PCG+ Member as they will handle it all for you.

The amount of tax you will save by paying £7k rather than £10k will cover the cost of PCG+ membership. If you are not already a member I would suggest joining PCG+ and paying the lower salary.

[Redcar]

I currently pay £10kpa (badly advised by old accountant).

My new accountant has recommended that I change to the £7605 as quoted by some of your guys.

But I'm worried that this drop could open me up to investigation by HMRC (I'm Ltd and don't use any schemes).

Do you have any thoughts on this or am I just being paranoid?

[minstrel]

What about employees NI? Surely this is what pushes it above the threshold making it better to take as div on 20% CT?

The Primary Threshold (£146 per week, £634 per month or £7,605 per year) is the point at which Employee NI starts being paid (12%).

As long as you keep below the Primary Threshold there is no Employee NI.

The Secondary Threshold (£144 per week, £624 per month, £7,488 per year) is the point at which Employer NI starts being paid (13.8%).

Don't ask me why the Secondary Threshold is lower than the Primary Threshold, why they didn't decided to call them Employer and Employee Thresholds, or why they even bother having two separate thresholds when they are within a few quid of each other.

I think that's just the beauty of our quintessentially British taxation system

[kingcook]

You've got your figures wrong.

Salary is an expense so comes off your top line before Corporation Tax.

The choice is between paying 13.8% Employers NI or 20% CT.

Why TF would you want to opt to pay 20% CT rather than 13.8% NI?

Ah i seem to remember this in the other thread. IIRC there was debate as to how much you could save but it was literally a few quid, but you have to go through the effort of making a (small) payment to HMRC every mth/qtr.

[psychocandy]

You've got your figures wrong.

Salary is an expense so comes off your top line before Corporation Tax.

The choice is between paying 13.8% Employers NI or 20% CT.

Why TF would you want to opt to pay 20% CT rather than 13.8% NI?

What about employees NI? Surely this is what pushes it above the threshold making it better to take as div on 20% CT?

[Waldorf]

For the 2012/13 tax year beginning on 6 April this would be £7,488 (although if you have a tax code of 810L or less you will still pay some tax).

No you won't, if you pay a salary of £7488 you will only pay tax if your tax code is 747L or less.

[minstrel]

£146 per week
£634 per month
£7,605 per year

Source: HM Revenue & Customs: Rates and thresholds for employers

Thanks Contreras - was looking for the rates on HMRC, but only found this one which quotes weekly threshold.

[Contreras]

Isn't the optimum level £7,592? (Primary threshold £146 * 52)

£146 per week
£634 per month
£7,605 per year

Source: HM Revenue & Customs: Rates and thresholds for employers

Some people say it's more admin than it's worth to pay a small amount of Employers NI. Personally, I think it's more admin to fill in a nil PAYE return than to BACS a couple of quid to HMRC each quarter!

My point exactly. I believe it only makes a tenner difference but there are principles at stake here.

[minstrel]

**** that. My limited company pays 20% corp tax (after expenses) anyway. Why TF would i want to opt to pay even more than i have to?

You've got your figures wrong.

Salary is an expense so comes off your top line before Corporation Tax.

The choice is between paying 13.8% Employers NI or 20% CT.

Why TF would you want to opt to pay 20% CT rather than 13.8% NI?

[kingcook]

If you don't mind paying "a little NI" then as per last year (and the recent CUK discussion) you can pay £7605 instead of £7488 for optimum tax*.

**** that. My limited company pays 20% corp tax (after expenses) anyway. Why TF would i want to opt to pay even more than i have to?

[minstrel]

If you don't mind paying "a little NI" then as per last year (and the recent CUK discussion) you can pay £7605 instead of £7488 for optimum tax*.

Isn't the optimum level £7,592? (Primary threshold £146 * 52)

Some people say it's more admin than it's worth to pay a small amount of Employers NI. Personally, I think it's more admin to fill in a nil PAYE return than to BACS a couple of quid to HMRC each quarter!

[Contreras]

Yep. Thats what I want. Just wondered if the increased personal allowance made it worthwhile to pay a little NI now so as to use the whole allowance.

If you don't mind paying "a little NI" then as per last year (and the recent CUK discussion) you can pay £7605 instead of £7488 for optimum tax*.

This shouldn't be nearly as tricky as some would make out if you know how to work a computer to make online payments to HMRC PAYE account, and if you're incapable of that then how the heck are you going to pay yourself. *For a tenner benefit though it has to be viewed as a matter of principle!

All IMHO, IANAA, ...

(Or do the dividends still use some of the personal allowance?)

Yep, they sure do.

[psychocandy]

Our recommendation is £7,488 per annum or £624 per month.

At this level no NIC payments will be due but you will earn a credit towards the state pension etc.

Assuming you are on a normal tax code (810L for 2012/13) then there will be no tax deducted either.

If you pay at the National Minimum Wage, then this is set at £6.08 per hour (to increase to £6.19 from 01/10/12), so the annual salary would depend on the hours you do.

Alan

Hi alan,

Yep. Thats what I want. Just wondered if the increased personal allowance made it worthwhile to pay a little NI now so as to use the whole allowance.

(Or do the dividends still use some of the personal allowance?)