What's the minimum salary I can pay myself?

[beermeister]

I am director of limited company and am currently contracting.

What's the minimum amount I can pay myself in salary? I guess £5100 if I want to stay in State Pension, but suppose I'm not interested in this?

[DaveB]

As a director you dont have to pay yourself any salary at all. But for the purposes of tax efficiancy then a minimal salary up to the initial tax threshold is advantagous. There is a school of thought that says paying yourself NMW is a good move to avoid undue interest from HMRC but this is debated on a regular basis with no firm conclusions.

[Lewis]

I am director of limited company and am currently contracting.

What's the minimum amount I can pay myself in salary? I guess £5100 if I want to stay in State Pension, but suppose I'm not interested in this?

In 2007-2008, you need to earn over £4,524 for it to be a State Pension qualifying year.

http://www.direct.gov.uk/en/MoneyTax...on/DG_10014671

[ASB]

The reason why it is more tax efficient to pay yourself 5200 rather tan 0 is probably best shown by example, because it doesn't really sound right.

T/Over 10,000
Expenses Nil

Profit 10,000
CT 2,000

Available for dividend £8,000

Personal side: no recalim is available, so net in pocket = £8,000, tax paid (self and co) = £2,000

---------------------------------

T/Over 10,000
Expenses Nil
Salary 5,200 (ee/er NI + paye = 0)

Profit 4,800
CT 960

Available for dividend £3,840

Personal side: net in pocket = £9,040. Total tax = £960.


A further advantage of the salary is that between the LEL for NI and the zero rate although the NI payable is nil you still get a years pension entitlement (but check....)

[Of course if you have salary from elsewhere as well then you might as well pay no salary]

[TheFaQQer]

Some would argue that you need to pay yourself minimum wage at least - that's what my accountant recommended.

[ASB]

Some would argue that you need to pay yourself minimum wage at least - that's what my accountant recommended.

I know a number of accountants recommend it. Any recommendation as a "lets try to keep below the radar" is fair enough.

I would be concerned about any accountant suggesting it was a LEGAL requirement to pay NMW to a director (unless the director has a service contract).

Here's what the DTI have to say:-

http://www.dti.gov.uk/employment/pay...page12589.html

[TheFaQQer]

I know a number of accountants recommend it. Any recommendation as a "lets try to keep below the radar" is fair enough.

I would be concerned about any accountant suggesting it was a LEGAL requirement to pay NMW to a director (unless the director has a service contract).

Here's what the DTI have to say:-

http://www.dti.gov.uk/employment/pay...page12589.html

No - mine was a definite recommendation to try and keep things off radar.

There is no requirement to pay a director any salary though.

[2uk]

the accountant said it is common for contractors to draw 800 and something /month as a salary

[TheFaQQer]

the accountant said it is common for contractors to draw 800 and something /month as a salary

That's just over minimum wage, which is what I pay myself.

[glashIFA@Paramount]

I am director of limited company and am currently contracting.

What's the minimum amount I can pay myself in salary? I guess £5100 if I want to stay in State Pension, but suppose I'm not interested in this?

In 07/08 the Lower Earnings Limit is £87 pw which will qualify you for a state pension. However, this level of salary will also qulaify you for a State Second Pension (S2P, formerly SERPS) and the rebate for this will be based on assumed earnings of £13,000 so it's a bit of a freebie really. So you can avoid NI but still qualify for OAP and S2P.