how much salary ?

[andy]

I have started my new company. I have to decide on the salary for me and my spouse.On an income of £80k how much should i salary should i give.

my accountant suggest minimum wage salary (£10k)which looks quite a lot.
and says that revenue does a search for directors who pay themselves very low salaries.
is that true ?how much the peeps here are paying themselves?

[Bovvered]

I tend to agree with your accountant though others may not.

I pay myself 20K and take the rest in divis, quarterly.

[XLMonkey]

I understand the logic behind the tall poppies stuff, but does anyone know if it the IR actually do target company directors on minimum wage? Reason for my question is that, anecdotally, I know quite a few contractors who go for minimum wage, and a few who pay themselves c. 20k, but haven't actually seen the ones on minimum wage getting investigated more often...

[ChimpMaster]

I understand the logic behind the tall poppies stuff, but does anyone know if it the IR actually do target company directors on minimum wage? Reason for my question is that, anecdotally, I know quite a few contractors who go for minimum wage, and a few who pay themselves c. 20k, but haven't actually seen the ones on minimum wage getting investigated more often...

of course, there's nothing wrong with being investigated if you're out of IR35. If you have a fool proof system then you're OK with min. salary. Otherwise min. salary is just one of many many factors that HMRC might be looking out for, so why take the risk to save a couple of hundred £ a year?

[XLMonkey]

of course, there's nothing wrong with being investigated if you're out of IR35. If you have a fool proof system then you're OK with min. salary. Otherwise min. salary is just one of many many factors that HMRC might be looking out for, so why take the risk to save a couple of hundred £ a year?

understand, but my point was whether or not you are taking a risk at all.... I'm not sure that the nice people at the IR actually sit down of a morning and go:
LIST [company directors] WHERE [salary]<10,000
STEP 1 to [salary]
RUN [investigation]
GO TO STEP 1

mostly because I'm not convinced that the nice people at the IR are smart enough to do this.

[boredsenseless]

understand, but my point was whether or not you are taking a risk at all.... I'm not sure that the nice people at the IR actually sit down of a morning and go:
LIST [company directors] WHERE [salary]<10,000
STEP 1 to [salary]
RUN [investigation]
GO TO STEP 1

mostly because I'm not convinced that the nice people at the IR are smart enough to do this.

Oh dear!! The people you are talking about are some of the greatest minds on earth when it comes to dreaming up ways to tax people. Surely given the fact they spend millions on IT and big4 consultancies they would have come up with the little calculation you have.

Never underestimate these guys, but then again if you are legal and above board you've nothing to worry.

Incidentally so long as you pay National Minimum Wage for every hour you or your spouse work, you have satisfied your obligations with regard to salary level, its only if you really are a deemed employee trying to hide it that the rest comes in.

GIven that 'real' companies advertise, have insurance for everything under the sun, have proof of multiple income streams, on-time VAT returns and on-time accounts return all the info they need to determine if you are trying a fast one is already in their hands.

FINALLY - trust your accountant setting efficient salary/dividends schemes up is bread and butter to them you arent the first person who has wanted to save tax. If you don't trust them to do this properly maybe you need a different one???

[malvolio]

Don't forget that IR35 investigations usually start with a PAYE complliance review. Therefore, if you never make any mistakes on your returns, hit all the deadlines and operate consistently, the chances are you won't get spotted. However, if you suddenly switch from standard salary to minimum+dividends, if your taxable income changes drastically year on year or if you send in a blatantly incorrect form, the antennae will twitch.

So low salary patterns from day 1 are probably not going to wave flags all by themselves, but switching from one model to another may do.

[ChimpMaster]

However, if you suddenly switch from standard salary to minimum+dividends, if your taxable income changes drastically year on year or if you send in a blatantly incorrect form, the antennae will twitch.

So low salary patterns from day 1 are probably not going to wave flags all by themselves, but switching from one model to another may do.

Totally agree. I am concerned about this myself, having gone from a high paying PAYE job to a low paid contracting salary of 15k then to 12k 6 months later. I have been told by people "who know people" in HMRC that changing levels of taxation attract more attention.

Having said that, though I might have paid around 35k tax in my permie role 2 years ago, overall I must be generating more tax for GB now, what with VAT, corporation tax, NI etc. So why do HMRC always cry? Can't they just be happy that I'm earning more and generating more tax revenue for them?

[ASB]

Incidentally so long as you pay National Minimum Wage for every hour you or your spouse work, you have satisfied your obligations with regard to salary level,

That is at least questionable. http://business.timesonline.co.uk/ar...0512_2,00.html

"The DTI said company directors do not have to pay themselves the minimum wage unless they have an employment contract. The Inland Revenue later confirmed this in their "Working Together" release, which can be found at inlandrevenue.gov.uk/workingtogether

The DTI said the Government had always made it clear that the law would only cover directors if they were also workers as defined for the purpose of the National Minimum Wage Act."

Personally I had always paid myself ver little since the abolition of the investment income surcharge. Receny the LEL plus 1 pound seems ideal - I get a years pension credit but no NI to pay.

The IR have been known to try and force people to pay the minimum wags (if it applies) but even that is questionable, since it needs a complaint to them before they can do so.

It makes no difference whatsoever to the above whether you are inside or outsider IR35. [Of course if the former you will end up with a large deemed payment but thats a different thing].

Another thing to consider is whether to have the company reimburse miuleage or not. If you are a 40% taxpayer with all that dividend income it might be best not to. If you don't reimbure mileage this will of course increase company profits by that amount and Co will suffer 19% on it (I am assuming the higher rate does not apply to many here).

You as an individual casn then calim at 40p/25p against your pre tax income. Thuse you can relief at 40% on it if you pay youself a mileage rate of zero. [Assuming the mileage is claimable in the first place of course].

[XLMonkey]

I have been told by people "who know people" in HMRC that changing levels of taxation attract more attention.

thanks Tazman, that's kind of what I expected.