Salary and dividends question.

[Debz]

Just about to start my first contract and wondered how I go about paying for company expenses if my business account has £0. Obviously I would transfer funds from my personal account to the business account - would this be classed as a directors loan and then I would pay it back to my personal account once I have funds? Are there any tax implications by using this method?

Based on being outside IR35 I have been advised of taking the minimum salary of the following:

£8,060 per annum, which would mean you wouldn’t pay any NI or income tax if your tax code was above 859L.
£10,600 per annum, which would mean you would pay NI but not income tax if your tax was 1060L. The benefit is you would make an additional £200 from this salary each year, but have the added burden of making quarterly payments to HMRC.

I do not yet have my P45 as my umbrella company have informed me it will take a month to come. My question is if the basic personal allowance is £10,600 and Im sure my tax code is 1060L then why have I been advised to take the salary of £8060 per annum?

Thanks in advance!

[stek]

Pay for them personally and claim back from Ltd when funds permit.

[PurpleGorilla]

Float the account with a director loan and pay it back when funds allow. As long as not faffing with interest earned and just pay it back it is a non issue. Keep it clean, pay as much as poss from your biz account (as long as the expenses are legit).

[Michael at BI Accountancy]

Just about to start my first contract and wondered how I go about paying for company expenses if my business account has £0. Obviously I would transfer funds from my personal account to the business account - would this be classed as a directors loan and then I would pay it back to my personal account once I have funds? Are there any tax implications by using this method?

Based on being outside IR35 I have been advised of taking the minimum salary of the following:

£8,060 per annum, which would mean you wouldn’t pay any NI or income tax if your tax code was above 859L.
£10,600 per annum, which would mean you would pay NI but not income tax if your tax was 1060L. The benefit is you would make an additional £200 from this salary each year, but have the added burden of making quarterly payments to HMRC.

I do not yet have my P45 as my umbrella company have informed me it will take a month to come. My question is if the basic personal allowance is £10,600 and Im sure my tax code is 1060L then why have I been advised to take the salary of £8060 per annum?

Thanks in advance!

Hi Debz,

For the expenses you can either pay money into the company (Capital introduced) or as stek says pay for them personally and reclaim the amount once you have funds in the company to do so.

As for the salary, £8,060 is the amount you can pay before NI kicks in. The personal allowance is the amount you can earn before you have to pay (PAYE)Tax.

You will however have to take into account how much you have already received in the tax year(P45).

As for the quarterly payments, you will only tend to have to make one payment in April. Due to directors being taxed differently to a standard employee.

Hope this helps.

Michael at BI Accountancy

[northernladuk]

Have you signed up.for an accountant yet? They should be your first port of call for all this.

[Debz]

Have you signed up.for an accountant yet? They should be your first port of call for all this.

Thank you all for your help - much appreciated.

Northernladuk - though you might say that. Yes I do have an accountant but there's no harm in getting advice from more experienced contractors either who once started out as first time contractors after all thats what forums are for.

[stek]

Thank you all for your help - much appreciated.

Northernladuk - though you might say that. Yes I do have an accountant but there's no harm in getting advice from more experienced contractors either who once started out as first time contractors after all thats what forums are for.

Only if you mistrust your accountant, which seems the case here.

[Debz]

You lot are funny. Someone's always bumping their gums on this forum.

[TheCyclingProgrammer]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

There are no tax implications to the latter at all and no tax implications to the former so long as they are wholly, exclusively and necessarily for business purposes (you'll need to enter these on your tax return and P11D though).

[Debz]

I prefer to keep company and personal (but still business) expenses separate, so I would:

* Pay for your own out of pocket business expenses (travel, subsistence, accommodation etc.) and do an expense claim once YourCo has the funds to pay you back

* If there are things you need to buy for YourCo or other company expenses (equipment, accountancy fees, admin expenses etc.) then I'd transfer the money to YourCo as a director's loan - this means you can pay for your company expenses from the company bank account - and again pay it back when there are funds to do so.

There are no tax implications to the latter at all and no tax implications to the former so long as they are wholly, exclusively and necessarily for business purposes (you'll need to enter these on your tax return and P11D though).

Thank you TheCyclingProgrammer your straight forward no nonsense answer to my question helped clear up alot!