Reply to: On the bench - JSA, salary etc

[Scoobos]

Because this forum is here to help people who are trying to research being a contractor, among other things.

What would be the point in the forum if everyone just pays for pro advice instead of using it...

Anyhoo <off me soapbox>

[northernladuk]

But NLUK, how can you search for stuff in threads, if they aren't made in the first place?

You don't search the threads, you ask a professional who you pay or you go research it on the web. Millions of scroats can get on to benefits ok but Psychobabble has to use a 5 page thread before he asks the right person. It's just ridiculous.

If you found out that your accountant or any other business asks questions on a board without doing any basic research first would you spend your money with them?

[Scoobos]

But NLUK, how can you search for stuff in threads, if they aren't made in the first place?

[northernladuk]

OK. My accountant has explained it all. Top job by them as per usual. (Danny at Nixon Williams)

Yes. You need a P45 to claim JSA.
Yes. You'd have to stop paying salary.
Yes. You can catch up salary later if it suits (so you still get to £7K for the year).
Also, if needs be you can cancel dividend or loan the company personal money to pay the salary if you want.

Shame you didn't ask them first hey......

[psychocandy]

OK. My accountant has explained it all. Top job by them as per usual. (Danny at Nixon Williams)

Yes. You need a P45 to claim JSA.
Yes. You'd have to stop paying salary.
Yes. You can catch up salary later if it suits (so you still get to £7K for the year).
Also, if needs be you can cancel dividend or loan the company personal money to pay the salary if you want.

[stek]

The commercial implication is:
If you have been contracting for a few years, and you have not been taking dividends which incur the extra 25% tax, you will likely have alot of money in your business account.
This money is much more useful in your personal account where you can earn more interest or invest in property etc.
Therefore, at the 6th april each, you can take alot of money out of your business accounts in one lump sum:
- PAYE ~ £7K
- Dividends ~ £32K
- Dividends for spouse ~ £32K
- Directors loan ~ £5K (or more if you dont mind paying interest)

Its also much less paper work, as you dont need to do regular dividend meeting minutes. Also, less worrying about how much to take out each month.

FTFY

[psychocandy]

Regarding PAYE:
if you paid all the company monies out as dividends + PAYE, and have not enough to use up your remaining tax free allowance, your previous dividend payments can be re-attributed as PAYE payments or director loan payments. Therefore, you can make sure your allowance is fully utilised (for this year only).

Actually, as a director, you dont have to pay yourself a monthly salary. You could actually, pay yourself a year salary.

I am planning (with my accountants approval) to pay myself on 6th april 2013 a full years salary in advance for 2013/2014.

Are you sure about this?

[lithium147]

The commercial implication is:
If you have been contracting for a few years, and you have not been taking dividends which incur the extra 25% tax, you will likely have alot of money in your business account.
This money is much more useful in your personal account where you can earn more interest or invest in property etc.
Therefore, at the 6th april each, you can take alot of money out of your business accounts in one lump sum:
- PAYE ~ £7K
- Dividends ~ £32K
- Dividends for partner ~ £32K
- Directors loan ~ £5K (or more if you dont mind paying interest)

Its also much less paper work, as you dont need to do regular dividend meeting minutes. Also, less worrying about how much to take out each month.

[captainham]

You can pay a yearly salary (top of page 8), although I believe a lot of commercial payroll software out there can't handle this (which may become more of an issue next year when RTI kicks in).

[jamesbrown]

Surely a salary need not be monthly-based? It is not uncommon for it to be weekly, fortnightly, or 4-weekly. What's the problem with it being annual?

It doesn't have to be anything, but there are implications. You'll either have to deal with the PAYE from a large payment upfront (depending on what PAYE frequency you might be on) or create a loan that is paid back each month. I can't see any other way, but happy to be corrected.....

What's the commercial reason anyway? Isn't it just an attempt to get more money out more quickly without taking a tax hit?

[Ignis Fatuus]

You can't do that without it being a loan. A salary is paid in the month it falls due or later, not in advance. You can pay in arrears without problems.

Surely a salary need not be monthly-based? It is not uncommon for it to be weekly, fortnightly, or 4-weekly. What's the problem with it being annual?

[jamesbrown]

Actually, as a director, you dont have to pay yourself a monthly salary. You could actually, pay yourself a year salary.

I am planning (with my accountants approval) to pay myself on 6th april 2013 a full years salary in advance for 2013/2014.

You can't do that without it being a loan. A salary is paid in the month it falls due or later, not in advance. You can pay in arrears without problems.

[lithium147]

Regarding PAYE:
if you paid all the company monies out as dividends + PAYE, and have not enough to use up your remaining tax free allowance, your previous dividend payments can be re-attributed as PAYE payments or director loan payments. Therefore, you can make sure your allowance is fully utilised (for this year only).

Actually, as a director, you dont have to pay yourself a monthly salary. You could actually, pay yourself a year salary.

I am planning (with my accountants approval) to pay myself on 6th april 2013 a full years salary in advance for 2013/2014.

[SueEllen]

I don't know why it's impossible for you to search but the JSA amount is £71 a week for a single person and £111 a week for a couple. (Hint- direct.gov.uk gives you the amount and more information.)

They are also a bit funny about sole traders/small limited company directors, even though you are entitled to Contributions JSA due to not having any income coming in.

Part of the problem is that they don't understand how small businesses work.

BTW I did encourage a couple of people to claim it in the past 18 months and they stated how horrible the experience was, and I'm sure one of them had claimed before many years ago.

[psychocandy]

can you get contribution based JSA if you have been paying 7K ? I thought that figure needed to be a bit higher

I could be wrong and Im sure NLUK will correct me but I think the threshold is below this, so that even if you dont pay any NI, you are credited with it if you know what I mean if its over this amount.