Salary for 2013/14

[Martin at NixonWilliams]

Thanks for clarifying that, guys!

So as the director of the company with no contract of employment and a 944L tax code I should take £7,696 / £641.33 per month for 2013/14 (was £7488 / £624 per month for 2012/13) and this will mean that I keep my NI stamp up to date but don't have the admin of making PAYE payments.

My second question is presuming a £7,696 salary and no other income, what is the maximum dividend I can take for 2013/14 without hitting the higher rate tax limit?


Yes, I know I could ask my accountant but this is a question that lots of people will want to know the answer to and I'd like to discuss it here....

Hi Wanderer,

That is correct, though make sure you are on the correct tax code as you could end up paying PAYE if it is incorrect!

The maximum dividend that can be taken is £30,378 (net), calculated as follows:

£41,450 - Higher rate threshold for 2013/14
(£7,696) - Salary for 2013/14
= £33,754 - Gross dividend available (£30,378 net).

The above assumes you do not have any other income - other sources of income such as rental property income or bank interest should be considered if your intention is to declare dividends up to the higher rate tax threshold.

I hope this helps.

Martin

[Wanderer]

Thanks for clarifying that, guys!

So as the director of the company with no contract of employment and a 944L tax code I should take £7,696 / £641.33 per month for 2013/14 (was £7488 / £624 per month for 2012/13) and this will mean that I keep my NI stamp up to date but don't have the admin of making PAYE payments.

My second question is presuming a £7,696 salary and no other income, what is the maximum dividend I can take for 2013/14 without hitting the higher rate tax limit?


Yes, I know I could ask my accountant but this is a question that lots of people will want to know the answer to and I'd like to discuss it here....

[Alan @ BroomeAffinity]

The government with RTI kicking in, could possibly be looking at contractors who are on the minimum and it may send alarm bells ringing. 

Wasn't this debated here a couple of weeks back? Are you seriously suggesting that there is a significantly increased chance of HMRC having an enquiry because the salary aspect is £7,000, not £12,000 (or whatever)?

[Nathan SJD Accountancy]

SJD's advice has nothing to with the state pension - you only need to pay £5,668 for 2013/14 in order to earn a qualifying year. This is less than the NI thresholds, not more.

Martin

WMS

[Martin at NixonWilliams]

We take the stance SJD do on this and say you should pay yourself a bit more every month than threshold to qualify for sate pension.

The government with RTI kicking in, could possibly be looking at contractors who are on the minimum and it may send alarm bells ringing.

Decision as a director of a company is yours, we are only here to advise.

SJD's advice has nothing to with the state pension - you only need to pay £5,668 for 2013/14 in order to earn a qualifying year. This is less than the NI thresholds, not more.

Yes RTI will give HMRC more information sooner, but I can't see that somebody paying slightly more than £641 will be off the hook so easily!

Martin

[NimbleJackAccounting]

Tough one

We take the stance SJD do on this and say you should pay yourself a bit more every month than threshold to qualify for sate pension.

The government with RTI kicking in, could possibly be looking at contractors who are on the minimum and it may send alarm bells ringing.

Decision as a director of a company is yours, we are only here to advise.

[kingcook]

Correct. Or for simplicity 7,692 (£641 per month rather than £641.33!)

Or £641/mth with a year end bonus of £4

[Martin at NixonWilliams]

Isnt paying the small amount of NI a good idea as it registers another year for you state pension?

As eek says, you can earn a qualifying year towards your state pension without actually paying any National Insurance.

The minimum for this to be achieved is earnings at the Lower Earnings Limit (LEL), which is £109 p/w for 2013/14 - a salary of £5,668 would therefore be sufficient for this purpose but it's better to use up the remainder of the NI allowances (to £7,696) where possible.

I hope this helps.

Martin

[Andrew@Wisteria]

You can pay yourself enough that you hit the stamp threshold (to get that year in the pension) without actually paying employers NI . As martin says the amount you need to pay yourself to get the stamp next year is £7,696.

Correct. Or for simplicity 7,692 (£641 per month rather than £641.33!)

[eek]

Isnt paying the small amount of NI a good idea as it registers another year for you state pension?

You can pay yourself enough that you hit the stamp threshold (to get that year in the pension) without actually paying employers NI . As martin says the amount you need to pay yourself to get the stamp next year is £7,696.

[Chods]

Isnt paying the small amount of NI a good idea as it registers another year for you state pension?

[Martin at NixonWilliams]

I used to take £7488 for 2012/13 to avoid paying PAYE/NI.

Accountant says that with a 944L tax code and no other income I should take £9,350 and tax free dividends up to £28,600 for the 2013/14 tax year.

Just want to double check that - does it sound correct?

Hi Wanderer,

Without knowing the basis of your accountants suggestion it is difficult to say whether it is correct or not. However, it is not the most efficient option available. Assuming you are the director and there is no contract of employment in place between you and your company, you will not be subject to the National Minimum Wage rules and are effectively free to choose a salary at a level that suits you best.

The most common salary level for contractors is the £7,488 you received for 2012/13 (this will rise to £7,696 for 2013/14). Note that a slightly higher salary is usually more efficient but it creates the additional administration of paying across a very small amount of employers NI.

I hope this helps.

Martin

[Wanderer]

I used to take £7488 for 2012/13 to avoid paying PAYE/NI.

Accountant says that with a 944L tax code and no other income I should take £9,350 and tax free dividends up to £28,600 for the 2013/14 tax year.

Just want to double check that - does it sound correct?