Worth registering my new Ltd Co for PAYE?

[rm55]

Hi all, quick question. I've been working through an umbrella company for the last couple of years but will be starting a new contract on monday through my new Ltd co (formed in June 2013).

My P45 says my total pay to date is £7164. Therefore I don't think it's worth the hassle/admin of registering for PAYE until April next year. Can I just live off dividends until then?

[GazCol]

It would be more tax efficient to pay yourself a small monthly salary, keeping you below £9,440 for the tax year and take dividends after that.

[Craig at Nixon Williams]

If you do register for PAYE and pay a salary of £2,276 (to take your NS income to the personal allowance) then you'll be able to take net dividends of £28,809 before reaching the HR threshold - you will therefore get £31,085 (2276+31085) from the company without incurring personal tax. You will save CT of £455.20 as a result of taking the salary.

If you don't take a salary and just take dividends then you will be able to declare £30,857 before reaching the HR threshold and will not get the CT saving.

I'd say that it is worth it for the extra tax free income and the CT saving.

Hope this helps!
Craig

[GazCol]

If you do register for PAYE and pay a salary of £2,276 (to take your NS income to the personal allowance) then you'll be able to take net dividends of £28,809 before reaching the HR threshold - you will therefore get £31,085 (2276+31085) from the company without incurring personal tax. You will save CT of £455.20 as a result of taking the salary.

If you don't take a salary and just take dividends then you will be able to declare £30,857 before reaching the HR threshold and will not get the CT saving.

I'd say that it is worth it for the extra tax free income and the CT saving.

Hope this helps!
Craig

Would he have to register for PAYE to do that?

[northernladuk]

You are going to get an accountant aren't you?

[Craig at Nixon Williams]

Would he have to register for PAYE to do that?

Yes, under the RTI rules each time an employee is paid a submission needs to me made to HMRC.

If he is doing it himself then he could wait until March and pay it all in one go so that the number of submissions is kept to a minimum. I presume that he would be registering next year anyway!

Craig

[TheCyclingProgrammer]

If you do register for PAYE and pay a salary of £2,276 (to take your NS income to the personal allowance) then you'll be able to take net dividends of £28,809 before reaching the HR threshold - you will therefore get £31,085 (2276+31085) from the company without incurring personal tax. You will save CT of £455.20 as a result of taking the salary.

If you don't take a salary and just take dividends then you will be able to declare £30,857 before reaching the HR threshold and will not get the CT saving.

I'd say that it is worth it for the extra tax free income and the CT saving.

Hmm. Not sure I'd agree. You haven't factored in NI contributions. Taking your salary right up to the personal allowance will cost you about £200 in employee NI contributions and £240 in employers contributions, almost wiping out the CT saving.

According to my accountant, the optimum salary for 2013/14 is £7,755, taking you above the NI LEL (making it a qualifying year for NI purposes), costing you under a tenner in NI contributions and saving you about £1500 in CT.

http://www.3caonline.com/as-a-direct...elf-in-201314/

On that basis, OP could pay himself another £600 in salary but personally, I don't think its worth the faff of setting up PAYE now when he could wait until the next tax year.

[Craig at Nixon Williams]

Hmm. Not sure I'd agree. You haven't factored in NI contributions. Taking your salary right up to the personal allowance will cost you about £200 in employee NI contributions and £240 in employers contributions, almost wiping out the CT saving.

According to my accountant, the optimum salary for 2013/14 is £7,755, taking you above the NI LEL (making it a qualifying year for NI purposes), costing you under a tenner in NI contributions and saving you about £1500 in CT.

There would be no point in taking more than what I have suggested because he would pay income tax at 20% (as he has already had salary) - though he would save CT at 20% on the salary, so overall it is tax neutral.

Hope this clarifies!
Craig

[TheCyclingProgrammer]

There would be no point in taking more than what I have suggested because he would pay income tax at 20% (as he has already had salary) - though he would save CT at 20% on the salary, so overall it is tax neutral.

You said he could pay himself another £2276 without incurring any tax. Thats not true - it would cost him nearly £450 in NI contributions (employee and employer). Even though there is CT relief on employer contributions, it would still be costing him more money.

My point was that there doesn't seem to be much point in taking any more than he already has taken in salary (up to another £600 would still be cost effective, but that doesn't account for the faff of setting up PAYE to just pay effectively one months salary).

He may as well just take dividends for the rest of this tax year. He's not going to save anything by paying himself up to the personal allowance.

[Craig at Nixon Williams]

You said he could pay himself another £2276 without incurring any tax. Thats not true - it would cost him nearly £450 in NI contributions (employee and employer). Even though there is CT relief on employer contributions, it would still be costing him more money.

It wouldn't cost him anything in NI - the NI threshold per employment not overall.

Craig