First Contract!

[malster]

Hi All,

Newbie to the forum, this is my first post.

I've yet to sit down with an accountant and talk things over, but hoping I could get a general consensus on here. I've won my first contract, but it's only worth about £20,000 per annum. I'm hoping to obtain a few more as I'll still have spare time

My question is, what is a sensible directors salary, should I be paying myself dividends - or is it not worth it at this level of income?

Any advice would be greatly appreciated

[northernladuk]

I don't think LTD was worthwhile under 30k.

With regard to salary and divis read beginners guides to right -->

Also have a look at this and the next page. Divis and wage has been discussed at great length this week.

If you can't find it either do a search or look for Psychocandy and read every post they started. That will cover all the basics!!!

[Greg@CapitalCity]

Hi malster,

A sensible salary probably starts at about £7,000 per year in terms of overall tax efficiency, and overall your company operation will become less tax efficient once you start paying more of a salary than this. As to the reasons for paying yourself a higher salary than £7,000, what northernladuk suggests would make good reading.

Once you have decided what salary to pay yourself, then if you want/need to take more money from your business, dividends will be the route to take. There are numerous conditions around taking dividends too, so just make sure you understand these when you sit down with your accountant.

If you intend to work through your own limited company, then with an initial turnover of £20,000 pa, you should to looking to take a mix of salary and dividends to optimise your overall tax position.

[mudskipper]

Hi malster,

A sensible salary probably starts at about £7,000 per year in terms of overall tax efficiency, and overall your company operation will become less tax efficient once you start paying more of a salary than this. As to the reasons for paying yourself a higher salary than £7,000, what northernladuk suggests would make good reading.

Once you have decided what salary to pay yourself, then if you want/need to take more money from your business, dividends will be the route to take. There are numerous conditions around taking dividends too, so just make sure you understand these when you sit down with your accountant.

If you intend to work through your own limited company, then with an initial turnover of £20,000 pa, you should to looking to take a mix of salary and dividends to optimise your overall tax position.

Bear in mind that to run via a Ltd you will almost certainly need an accountant, which at around £1000 - £1500 a year is quite a big chunk of 20K. Not sure how much NI you'd pay on 20K - that's effectively what you're saving via going ltd (assuming you're outside IR35).

[NotAllThere]

Are you going to have multiple contracts running at the same time? What is your line of work? One reason for going ltd is the protection afforded by limited liability.

[Support Monkey]

Hi All,

Newbie to the forum, this is my first post.

I've yet to sit down with an accountant and talk things over, but hoping I could get a general consensus on here. I've won my first contract, but it's only worth about £20,000 per annum. I'm hoping to obtain a few more as I'll still have spare time

My question is, what is a sensible directors salary, should I be paying myself dividends - or is it not worth it at this level of income?

Any advice would be greatly appreciated

Its probably not worth going limited if thats all your going to earn anymore than that if your going to do other contracts as well it probably would be

also forget this sitting down with accountants just contact Nixon williams or SJD unless your accounts are going to be complicated which at those earning levels is unlikely

[Sockpuppet]

also forget this sitting down with accountants just contact Nixon williams or SJD unless your accounts

Why? I use a local accountants firm and I don't ever get half the hassles some people seem to report on here with either of the above. Just becuase they're a popular choice don't ever discount the value of sitting across the table from someone talking through your options.

[northernladuk]

Why? I use a local accountants firm and I don't ever get half the hassles some people seem to report on here with either of the above. Just becuase they're a popular choice don't ever discount the value of sitting across the table from someone talking through your options.

Unfortunately no one answer is right. In my case I have had terrible problems with a local set up as have other here, Psychocandy for one recently. SJD are specialist in contractor accountants and have been pretty much perfect up to now for me. I have to do all my workings on spreadsheets provided by them which I have to say I think is great as I get a very good understanding of the workings but leave them to the clever stuff. My old accountant just asked for stuff and did (or didn't) everything so I didn't get much visibility or understanding.

My experience is completely the opposite to yours I am afraid.

[BlasterBates]

The advantage with a big firm like SJD who actually specialise in contractors, is that you´re going to get a reliable service. With "another" accountant, you may or may not. It is pot luck. Get a recommendation, and it is worth paying more for a reliable service. In particular an experienced accountant will be worth his salt when the taxman comes round to do an audit. I´ve seen contractors get into serious financial difficulty because their accountant was sloppy and they didn´t calculate or at least communicate the tax liability adequately. Very important to have an accountant who is on the ball. It can be very costly indeed if it goes wrong. Don´t skimp on the accountant.

I would agree with above though for 20 grand you want to compare an Umbrella solution with your own Ltd, simply because the costs of running the Ltd co may outweigh any tax benefits, and then go Ltd when you have a higher income.

[TestMangler]

Why? I use a local accountants firm and I don't ever get half the hassles some people seem to report on here with either of the above. Just becuase they're a popular choice don't ever discount the value of sitting across the table from someone talking through your options.

WHS ^3

And I pay about a third of the figures quoted above. Have had the same accountant for 17 years and I'm not behind bars, so he must be doing it right