Salary/Dividend Structure

[thermalp4]

Hi guys.

Based on 230/day 5 days a week with roughtly £1500 month expenses would it be possible for someone to work out a rough salary/dividend structure from that?

Just want to compare what I'm working off from my accounant and what some of the more experienced people on here would work it out as.

Thanks in advance for any help.

[thermalp4]

Outside IR35.

Thanks.

[MrRobin]

I am assuming:
You are on VAT flat rate scheme and in 1st year of business
You pay yourself a director salary of minimum wage (£10,750 pa)

22 working days in month @ £230/day ~ £5,060
VAT on £5k = £885
VAT payable = -£713
Expenses Out = -£1,500
Salary = -£896
Profit = £2,836
CT (21%) = -£596

Available to withdraw as dividend = £2,240

If you took that amount of dividend every month for a year then there would be a small amount of extra tax to pay (about £3/400 ish or so) after doing your tax return because you go over the £39,000 upper rate threshold

[Alan @ BroomeAffinity]

Remember that the £896 salary will have tax and NIC deducted from it as well.

[MrRobin]

Remember that the £896 salary will have tax and NIC deducted from it as well.

Yes, indeed. You won't receive all of that £896. Also I forgot to add in ER's NI into the calculation - about £55 per month to take away from the available divi.

[thermalp4]

I'm in my second year of bussiness now and will be paying my first lot of CT in september I think.

I'm not VAT registered at the moment and all my Expenses are reimbursed by the agency.

So I guess that would change things slightly.

Thanks very much for you help. Much appreciated.

My rate has only just gone up to 230. I've been on £191/day for the last year but after discussing with some of the guys i'm working with they all seem to be taking home considerably more than me working off the same kind of structure earning the same £191/day.

Based on £191/day (£955/week) with expenses averaging to £900 month my salary has been £585 with £1425 as divi.

Now expenses are not income so i'm only bringing home £2010 not inc expenses.

I'm invoicing £3820 every month average. (£955 x 4)

[Alan @ BroomeAffinity]

You need to get VAT registered ASAP. Its a simple 5% increase on your rate straight off.

[VectraMan]

You need to get VAT registered ASAP. Its a simple 5% increase on your rate straight off.

I wish. More like 0.5% in my case.

The OP says £1500 per month on expenses. If those are VAT reclaimable, he'd reclaim £223 per month compared to £172 gained by being on the FRS and not being able to reclaim. So the FRS would cost him £51 per month.

FRS is only worth it if your VAT reclaimable expenses (i.e. not trains) are low. And if you don't reach the threshold, probably not a lot of point getting registered at all.

[MrRobin]

You need to get VAT registered ASAP. Its a simple 5% increase on your rate straight off.

Your NET income will increase by 2.2% (3.4% in the first year) if registered under the FRS when compared to not being registered at all.

Whether you are better off on FRS or normal scheme is dependent on how your business works (most contractors would be better with the former)