An accountant has worked out a plan for my limited company (if i form one) where I will be paying around 18-20% tax a year...is that too good to be true???
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Re:Tax
20% seems kind of high to me but it depends a lot on what you need to take out to live on. -
Re: Re:Tax
High? so u mean I should be paying even less tax??
I am currently with a limited company, and am paying 33%+!!
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Re:Tax
OK - lets assume your companys first year is to 5th April so that it coincides with the personal tax year.
If you were to earn £60000 after expenses (travel/subsistence/accountants/indemnity/contract reviews etc etc).
You then take a salary of £4745 tax and NIC free and pay the wife £2000 for "Book-keeping" that leaves you with taxable profits of £53255. Corporation tax at 19% is £10118 or 16.8% of net profit of £60000.
You can then take out up to £28000 in dividends without paying any more tax as an individual. If your wife is another shareholder then make that £56000 split between you.Comment
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Re:Tax
We've done this to death in the general board.
To recap, it boils down to how much you want to take the IR on.
You could theoretically pay yourself no salary and take everything in dividends.
Same for your Mrs as secretary but don't you think you're waving a red flag to the IR if you pay < 10k as salary to any worker ?
Then again you just have to look at how the IR are reinterpreting Section 660a and how some couple is now in court battling the IR over how the secretary was not paid "market rates". Their tax bill is somewhere in the 30k range.
At the end of the day you're going to be defending yourself against the IR and what is (or isn't) a reasonable salary. They'll probably throw in a IR35 investigation while you're there.
Better yet, pay no tax and buy a one way ticket to Rio
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Re:FUD
If you are a contractor or any type of small business the government does not think you are a genuine business. You are only a genuine business to them if you have a factory and employ a unionised workforce.You could theoretically pay yourself no salary and take everything in dividends.
Same for your Mrs as secretary but don't you think you're waving a red flag to the IR if you pay < 10k as salary to any worker ?
What you are to them is an employee dodging the "proper" amount of tax.
You are also a soft target because it doesn't cost much to squeeze a few extra pounds of tax out of you because you feel intimidated by the overwhelming bureaucracy implemented by the legions of their faceless minions. The cut in government employees announced in the Budget will never happen - they'll just get re-designated, probably to the Revenue.
Trying to avoid confrontation with the taxman is therefore pointless - they will come looking for you anyway. You don't hide from a bully, you confront them.Comment
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Just a thought
“You could theoretically pay yourself no salary and take everything in dividends”
Doesn't make sense (if you want to take the maximum take home pay
) as you would lose the corporation tax saving on the £4,745 salary, now that they have change the rules re corporation tax / dividends.
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Re: Just a thought
that's exactly right, Robot.
Minimum wage + rest in dividends is the optimum way to go
(IR enquiries notwithstanding but as is said above, they'll view any scheme as a cheat so you may as well cheat and hope to get through the net. Keep the cash safe somewhere in case you get caught. Chances of being caught are not that high actually)Comment
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Re: Just a thought
If you pay yourself a minimum wage and don't pay high rate tax, it is possible to net out around 80% of gross contractor earnings.Comment
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Re: Just a thought
Shouldn't that be 80% of net earnings?Comment
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