Salary Ammount

Discussion in 'Accounts & Finance' started by TurboIT, Jul 6, 2014.

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  1. TurboIT

    TurboIT UKBF Newcomer Free Member

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    Posted: Jul 6, 2014 By: TurboIT Member since: Jan 3, 2014
    #1
  2. andygambles

    andygambles UKBF Ace Full Member - Verified Business

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    It really depends on what your Tax free allowance is. If you do not have any reduction from the standard £10k then paying yourself £10k per annum is tax efficient if you are able to claim back the Employers NIC Allowance. You will have some Employee NIC to pay.
     
    Posted: Jul 6, 2014 By: andygambles Member since: Jun 17, 2009
    #2
  3. Jeremiah@RHJ Accountants

    [email protected] Accountants UKBF Enthusiast Free Member

    595 102
    Why has your accountant said £650 per month?

    This is how i have explained it to my clients:

    Assuming you are not caught by IR35, you are 100% shareholder, a director and you do not have a contract of employment, then you are pretty much free to choose a salary at whatever level you like as the NMW rules will not apply. It is entirely your choice, but the common options are:

    £7,956 - This is the level of salary that can be paid before you incur any National Insurance. Note that there is a £2,000 employers NI incentive being introduced from 2014/15. If you qualify, a higher salary is likely to be more efficient.

    £10,000 - This is the personal allowance for this year, i.e. the amount you can earn before paying tax, and is likely to be the most efficient option for those entitled to the £2,000 employers NI incentive. You will incur employees NI on the difference between £7,956 and £10,000 but this is outweighed by the corporation tax saving.

    £12,000+ - A salary of £12,000+ is paid for different reasons. Some do it as they feel it protects them that bit more from an enquiry. For example if HMRC inspected all those paying a salary of £7,956, though there is no evidence to suggest this would happen. Others pay £12,000 purely to keep in line with NMW however given the amount of hours most contractors work £12,000 would probably not be enough anyway.
     
    Posted: Jul 6, 2014 By: [email protected] Accountants Member since: Jan 5, 2012
    #3
  4. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,388 3,834
    Why don't you ask your accountant?
     
    Posted: Jul 6, 2014 By: Newchodge Member since: Nov 8, 2012
    #4
  5. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,216 2,476
    Your accountant will (hopefully) have a specific reason for recommending £650 per month and will have information which we dont have so best advice is really to ask your accountant.
     
    Posted: Jul 7, 2014 By: MyAccountantOnline Member since: Sep 24, 2008
    #5
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