I am Outside Of IR35 - Now how does this reduce my tax?

[joey122]

Ok - I ve read a lot on this forum on IR35 and my contract is outside of iR35.

My question is how does this help tax???

I understand you pay yourself minimum wage a year and take the rest as dividends but you still do pay 40% tax on these dividends? Is that correct?

Is the only benefit not paying NI contributions?

[Peoplesoft bloke]

http://www.contractoruk.com/calculat...d-tax-calc.php

[joey122]

http://www.contractoruk.com/calculat...d-tax-calc.php

Thanks - So dividend tax is 32.5% and not 40%....

Is this the right way to read this?

[blacjac]

http://www.beersandideas.com/blog/wp...08/12/rtfm.png

[NotAllThere]

Ok - I ve read a lot on this forum on IR35

...but understood little.

Is the only benefit not paying NI contributions?

No.

Thanks - So dividend tax is 32.5% and not 40%....

Is this the right way to read this?

no.

[The Lone Gunman]

You clearly have not understood what it is all about.
Dont think about being IR35 exempt as saving you money think about being caught as a cost.

If you are caught then 95% of your companies income is regarded as your income and as such is taxable. It is deemed to contain both sets of NI contributions and income tax. Obviously your business does not make a profit so you reduce your corp tax bill accordingly.

[joey122]

...but understood little.No.no.

Jees - Thanks.

Welcome to a friendly forum.

[joey122]

You clearly have not understood what it is all about.
Dont think about being IR35 exempt as saving you money think about being caught as a cost.

If you are caught then 95% of your companies income is regarded as your income and as such is taxable. It is deemed to contain both sets of NI contributions and income tax. Obviously your business does not make a profit so you reduce your corp tax bill accordingly.

Thanks for this - Is there a sticky which actually sets out how this is done.

[Lockhouse]

Thanks for this - Is there a sticky which actually sets out how this is done.

A sticky? There's more to this contracting lark than can be stuffed on a post-it note. Or in one thread. I suggest you read the "First Timers Guide" on this site, then read it again, then come back and post.

[The Lone Gunman]

Thanks for this - Is there a sticky which actually sets out how this is done.

There are lots of explanations on the web for IR35. Over there on the right in the CUK Nav panel for example. You might also look at the PCG web site or shout99 for other and similar advice.

As for the "friendly" welcome. A lot of newbies fet short shrift. Maybe it is unfriendly, but the old grizzled and twisted members here get fed up of being asked for hard earned knowledge and free advice, particularly when it seems the person asking hasnt exactly made a lot of effort.
It also helps if you dont post in general. General is a zoo.