Reply to: Most tax efficient salary for 2016-17

[DallasDad]

You have doubled my turnover at a stroke. Be my accountant! Help me put a Mustang V8 through under "sundries".

Here you are you can have a virtual one, mine, well maybe not the car you wanted but it does have a 4.6L V8 derived from a 2004 Mustang GT + blower - 400BHP without traction control is quite entertaining.

https://www.youtube.com/watch?v=ccEccPZAr7A

[DaveB]

You have doubled my turnover at a stroke. Be my accountant! Help me put a Mustang V8 through under "sundries".

No need, buy it as an asset and use it as a company car.

[unixman]

Yeah, right, 11k is "commercial" on a turnover ~10x that amount

Commercial is what makes sense, not what it looks like.

You have doubled my turnover at a stroke. Be my accountant! Help me put a Mustang V8 through under "sundries".

[jamesbrown]

Stealing this for my Linkedin:



On topic, had a recent discussion with the accountant. She pointed out that one might choose 8k figure, 11k or even 13k (the living wage). She says there isn't that much difference in the tax efficiency, and that bigger sums are more "commercial", ie. look more realistic to Hector. I'll plop for 11 or 13.

Yeah, right, 11k is "commercial" on a turnover ~10x that amount

Commercial is what makes sense, not what it looks like.

[unixman]

Stealing this for my Linkedin:

... it's to holisticly morph competitive thinking while fungibly disintermediating efficient functionalities

On topic, had a recent discussion with the accountant. She pointed out that one might choose 8k figure, 11k or even 13k (the living wage). She says there isn't that much difference in the tax efficiency, and that bigger sums are more "commercial", ie. look more realistic to Hector. I'll plop for 11 or 13.

[Newbie Simon]

So what are the most tax efficient salaries to pay myself and my secretary/admin ?

If I increased my salary would this increase my take home pay? I would be paying income tax and NI but then I will be paying less corporation tax and also less dividends to be paid at the 7.5% basic tax rate.

[mudskipper]

Yes but they're crap!

So why not switch to one who isn't?

[smileyface]

You can, and there would be no further tax to pay; but you will already have been taxed at 20% Corp Tax on your dividends, so this is not the most efficient way to take the money.

Your accountant should be able to talk you through this stuff. You do have an accountant, don't you?

Yes but they're crap!

[TheFaQQer]

If it affects me negatively, it's a punishment, regardless of how it's tarted up. I'm sure the divvy tax increase isn't a punishment either, it's to holisticly morph competitive thinking while fungibly disintermediating efficient functionalities or some other mumbojumbo!

Like my first permie gig that gave everyone a £500 bonus if they took no sick days, and -£50 for each sick day taken as an incentive. Everyone viewed it as a punishment/paycut for being sick and would perpetuate the flu-pit ideology mentioned in the other thread.

But it doesn't affect you.

It's a particularly narrow view that the removal of a benefit that you were never intended to have is an unfair punishment, but if that's your view then that's your view.

[NibblyPig]

It's hardly a "punishment" - the EA was intended to encourage companies to take on employees, not for one man contractor limited companies to get a tax break.

If it affects me negatively, it's a punishment, regardless of how it's tarted up. I'm sure the divvy tax increase isn't a punishment either, it's to holisticly morph competitive thinking while fungibly disintermediating efficient functionalities or some other mumbojumbo!

Like my first permie gig that gave everyone a £500 bonus if they took no sick days, and -£50 for each sick day taken as an incentive. Everyone viewed it as a punishment/paycut for being sick and would perpetuate the flu-pit ideology mentioned in the other thread.

[TheFaQQer]

Yep - It is a bit unusual, I must admit.

If it avoids this unfortunate punishment for companies with a single employee that is also the director though, a happy coincidence it was set up that way.

It's hardly a "punishment" - the EA was intended to encourage companies to take on employees, not for one man contractor limited companies to get a tax break.

[mudskipper]

Also, does it imply if I choose NOT to take a salary, I can take £11,000 + £5,000 = £16,000 as dividends, completely tax free?

You can, and there would be no further tax to pay; but you will already have been taxed at 20% Corp Tax on your dividends, so this is not the most efficient way to take the money.

Your accountant should be able to talk you through this stuff. You do have an accountant, don't you?

[NibblyPig]

Ah.... Does he have a contract of employment?

But yes that will be a bit different from the norm.

Yep - It is a bit unusual, I must admit.

If it avoids this unfortunate punishment for companies with a single employee that is also the director though, a happy coincidence it was set up that way.

[northernladuk]

In my case I am employing him as a salaried employee.

Ah.... Does he have a contract of employment?

But yes that will be a bit different from the norm.

[NibblyPig]

Really?? I think you are using the wrong meaning. You are employing his services, not him.

In my case I am employing him as a salaried employee.