Working both perm and contracting - best payment method

[RyanDS]

Hi All,

Long time lurker, never posted before as generally the information here is solid and there is no need to delve any deeper.

However I am in a position where I really could use some advice and I am struggling to find anything online that is relevant.

I have been perm for years, and just started contracting. The work I am starting to do is mainly process review and projects that are long term, but part time (eg set up business reporting, then provide a few days a month to keep it updated and provide support.) So as of next month I will have 3 clients, each one I will be billing between 1-3 days a week. All would be simple to run through my newly created limited as it is all outside IR35, I could do the usual minimum wage / dividend etc structure.

Complication is my perm job wants to keep me part time, which actually suits me great as I would then have guarenteed income alongside contracting making the whole transition easier. Problem is that would be PAYE salary.

So I would have PAYE job - say £26k a year.
Then be billing £450 a day for 3 or 4 days a week.

Question is, is there any benefit to me paying minimum wage salary (avoid NI costs at least) via limited, then pay the rest in dividends? Or just pay it all in dividends? I have spoken to 2 accountants, both useless as they really only know how to deal with contractors or permies, not how to do a mix of the two. They both seem to come up with take home numbers for the ltd work that seems far too high and both ignored dividend tax at all.

Am I correct in my assumptions that the following would happen (ignoring expenses etc)

450pd
Less 20% corp tax = 360
Then dividend tax at £117 (due to being a higher rate tax payer YTD)
So take home £243, or around 54%, this being really low due to the perm role.

I know expenses will change this, as will some dividends be at only 7.5% but I would rather set expectations low than high.

Or does anyone know a good resource for doing a mixture?

Many thanks

[northernladuk]

Time to get an accountant I think.

[RyanDS]

Any recomendations? The contractor ones I have contacted have given very different answers, contradicting each other, and only seem to talk perm or contract, not a mixture.

[NotAllThere]

Time to get an accountant I think.

I think he might have figured that out already.

I have spoken to 2 accountants, both useless as they really only know how to deal with contractors or permies,

You should pay yourself NMW, and avoid any NI costs. Take whatever else you need as dividends - leave what you don't need in the company.

btw - I'm 50% employed and 50% contractor as well.

[man]

I have spoken to 2 accountants, both useless as they really only know how to deal with contractors or permies, not how to do a mix of the two.

It sounds like you've spoke to the wrong accountants (for you). I'd speak to a few more and this can be a test for them - after all, you need to hire one in the end anyway.

[HugeWhale]

You should pay yourself NMW, and avoid any NI costs. Take whatever else you need as dividends - leave what you don't need in the company.

btw - I'm 50% employed and 50% contractor as well.

None of my business - I'm just curious.

Why is this? He'll already be paying tax and NI on the 26K salary so any salary taken above that will attract tax and NI at the applicable rate. NI will be unavoidable won't it?

[RyanDS]

None of my business - I'm just curious.

Why is this? He'll already be paying tax and NI on the 26K salary so any salary taken above that will attract tax and NI at the applicable rate. NI will be unavoidable won't it?

NI isn't like tax. It is company dependant so your first £117 odd per week in every pay method will be free. Whereas tax free allowance is a one off and is shared between all your pay methods.

As to the tax / dividend efficiencies in general, that is what I am looking into.

Many thanks for the replies so far as well all!

[Alan @ BroomeAffinity]

Can’t see any benefit in paying salary tbh. Dividend out all the income you need. But also look at deferral and pensions if you’re seeking tax efficiency.

[northernladuk]

Any recomendations? The contractor ones I have contacted have given very different answers, contradicting each other, and only seem to talk perm or contract, not a mixture.

There is a 44 page sticky on it in this very area of the forum. I would have thought a long time lurker would have spotted it by now

[simes]

Can’t see any benefit in paying salary tbh. Dividend out all the income you need. But also look at deferral and pensions if you’re seeking tax efficiency.

Without further knowledge or info, I would agree with this.