If you're a contractor and pay yourself a salary then you'll get taxed 65.8%

[ContractorAccountant]

Slightly over-dramatic but in 13/14 if you pay yourself a salary through your own Ltd company then the income between £32,010 and £41,450 will be hit by 65.8% "tax": 40% income tax + 12% Employee NI + 13.8% Employer NI.

Just felt like sharing that, what else do I do on such a sunny Friday afternoon?

So as a contractor if you (hypothetically speaking, not as a recommended approach) want to aggressively minimise your tax bill, you could set your salary income to £7,755 which will not incur any tax or NI. Then again, that salary level will stick out like a sore thumb ... maybe get picked off for a little IR35 digging.

Have great weekends folks!

[Clare@InTouch]

I would imagine that only those caught by IR35 would pay themselves such a high salary anyway

[LisaContractorUmbrella]

Slightly over-dramatic but in 12/13 if you pay yourself a salary through your own Ltd company then the income between £32,010 and £41,450 will be hit by 65.8% "tax": 40% income tax + 12% Employee NI + 13.8% Employer NI.

Just felt like sharing that, what else do I do on such a sunny Friday afternoon?

So as a contractor if you want to aggressively minimise your tax bill, set your salary income to £7,755 which will not incur any tax or NI. Then again, that salary level will stick out like a sore thumb ... maybe get picked off for a little IR35 digging.

Have great weekends folks!

Yep aggressively minimising is great advice

[Pondlife]

Which tax year are we in?

[LisaContractorUmbrella]

Which tax year are we in?

2013/2014. Not a great post really was it?

[northernladuk]

Just to add to this there have been plenty of threads on this issue as there seems to be no hard and fast rule with different accountants suggesting different figures. The argument about whether to pay a bit of tax and NI still seems to rumble on with no clear cut answer and the onus appearing to be on the contractor and their stomach for risk to make the final decision...

Example thread..

http://forums.contractoruk.com/accou...ts-advice.html

Plenty of others but won't paste the links as most of them are pre-April so the exact figures quoted in the threads are now incorrect but the argument about paying a little NI or a little NI/Tax rumble on in them.

[northernladuk]

inniAccounts also started an interesting poll to get a feel what everyone was doing but unfortunately there were not many responses..

http://forums.contractoruk.com/accou...d-company.html

[Pondlife]

inniAccounts also started an interesting poll to get a feel what everyone was doing but unfortunately there were not many responses..

http://forums.contractoruk.com/accou...d-company.html

Be advised that this is a public poll: other users can see the choice(s) you selected.

Wonder why there wasn't much response.

[ContractorAccountant]

Oops

Sorry folks. Got my tax years mixed up. Updated the original post. And yes, actually setting the salary exactly equal to the primary threshold was just hypothetical. I should have been clearer about that.

[BlasterBates]

According to Bob Jones an ex-Inland Revenue tax inspector, paying yourself a minimum salary does make you a prime target.

What triggers an IR35 investigation? :: Contractor UK

Such was the warning yesterday from Bob Jones, an ex-Inland Revenue tax inspector, who outlined the typical appearance of a taxpayer the agency's IR35 inspectors might approach.

"Someone operating through a limited company who has relatively low turnover; is the sole director; has minimal expenses; pays [themselves] the minimum wage but has large dividends."