Salary, Dividends and Childcare Vouchers
Discussion
Hi Guys,
I'm in the throws of planning how to take my income for the new tax year 2008/09 and need confirmation that my workings out are correct.
My tax code is 543L (i pay on tax on account in Jan/Jul)
I plan to take £5430 gross (£452.50/mth. as basic salary) thereby paying NO tax but ensuring that basic NIC contribution is made.
Our 2 year old is starting a pre-school in Sept. and my wife does not work. In light of this, I have set up a "Kiddivouchers" sheme with my Ltd Co. and believe that I can pay myself £243/mth. tax free to help with childcare costs. Is this correct? Do I have to declare the total for the year (£2916) on my end of year return?
My main remuneration will be by way of declared dividend of £50,000.
Based on the above being my only income for the year, I calculate Tax payable of £8150.
Can anyone in a similar position confirm the above.
Many thanks,
C
I'm in the throws of planning how to take my income for the new tax year 2008/09 and need confirmation that my workings out are correct.
My tax code is 543L (i pay on tax on account in Jan/Jul)
I plan to take £5430 gross (£452.50/mth. as basic salary) thereby paying NO tax but ensuring that basic NIC contribution is made.
Our 2 year old is starting a pre-school in Sept. and my wife does not work. In light of this, I have set up a "Kiddivouchers" sheme with my Ltd Co. and believe that I can pay myself £243/mth. tax free to help with childcare costs. Is this correct? Do I have to declare the total for the year (£2916) on my end of year return?
My main remuneration will be by way of declared dividend of £50,000.
Based on the above being my only income for the year, I calculate Tax payable of £8150.
Can anyone in a similar position confirm the above.
Many thanks,
C
Thanks Eric. 
My accountant is unfortunately away on site somewhere this week and uncontactable. If you knew my accountants, there is little point troubling one of the other partners! Want to pay my dividend as lump sum early as possible in this new tax year to maximise investment potential.
Was hoping that someone could just give me confidence that i'm on the right track.
n.b. just noticed i've missed the 10% Tax Credit off the dividend amount.
My accountant is unfortunately away on site somewhere this week and uncontactable. If you knew my accountants, there is little point troubling one of the other partners!
Want to pay my dividend as lump sum early as possible in this new tax year to maximise investment potential.Was hoping that someone could just give me confidence that i'm on the right track.
n.b. just noticed i've missed the 10% Tax Credit off the dividend amount.
Your accountant is being extremely cautious.
At the moment, the government have no rights or powers to force a director to pay themselves a particular salary.
Note that, even in the famous Arctic Systems case, they NEVER went down that road in trying to pursue Mr Jones for more tax. All they were concerned about was the fact that Mr Jones was dividing the dividend income equally between himself and his wife. Even then, they failed to force Mr Jones to treat Mrs Jones share of the dividends paid as being his.
The Minimum Wage regulations DO NOT apply to directors of their own companies.
At the moment, the government have no rights or powers to force a director to pay themselves a particular salary.
Note that, even in the famous Arctic Systems case, they NEVER went down that road in trying to pursue Mr Jones for more tax. All they were concerned about was the fact that Mr Jones was dividing the dividend income equally between himself and his wife. Even then, they failed to force Mr Jones to treat Mrs Jones share of the dividends paid as being his.
The Minimum Wage regulations DO NOT apply to directors of their own companies.
Edited by Eric Mc on Monday 7th April 12:57
If you wife isn't working, then why is she not getting dividends/salary too ?
Other things to consider:- Pension. Capital purchases such as new computer.
Interested in the Kiddivouchers scheme, our little'un has just started a thezoo nursery so will ask my accountant about it.
Sure one of the contracting sites (ContractorUK, Shout99, or the PCG) would have some info.
Other things to consider:- Pension. Capital purchases such as new computer.
Interested in the Kiddivouchers scheme, our little'un has just started a the
Sure one of the contracting sites (ContractorUK, Shout99, or the PCG) would have some info.
Eric Mc said:
Your accountant is being extremely cautious.
At the moment, the government have no rights or powers to force a director to pay themselves a particular salary.
Note that, even in the famous Arctic Systems case, they NEVER went down that road in trying to pursue Mr Jones for more tax. All they were concerned about was the fact that Mr Jones was dividing the dividend income equally between himself and his wife. Even then, they failed to force Mr Jones to treat Mrs Jones share of the dividends paid as being his.
The Minimum Wage regulations DO NOT apply to directors of their own companies.
Agreed. At the moment, the government have no rights or powers to force a director to pay themselves a particular salary.
Note that, even in the famous Arctic Systems case, they NEVER went down that road in trying to pursue Mr Jones for more tax. All they were concerned about was the fact that Mr Jones was dividing the dividend income equally between himself and his wife. Even then, they failed to force Mr Jones to treat Mrs Jones share of the dividends paid as being his.
The Minimum Wage regulations DO NOT apply to directors of their own companies.
Edited by Eric Mc on Monday 7th April 12:57
I cannot see how paying yourself 24k 'protects' you any more than paying yourself 6. In fact, I would say that minimising your tax liability was the common and expected practice by accountants AND the revenue.
In fact the only times I have heard this to be otherwise is the 'offshore schemes' which for some reason pay £15k as PAYE for some reason, maybe to throw the revenue off the scent. IMHO, if I was in the revenue and saw a sole director with an accountant not minimising their tax liability I would wonder what was going on!
Noger,
http://www.kiddivouchers.com/
I looked at "Busy Bees" plus another Childcare voucher provider and decided "Kiddivouchers" offered the best rates. You need to make sure your choosen nursery/pre-school accept the vouchers.
My wife is not a shareholder of the Ltd Co., so unfortunately can't pay her a dividend but do use her full allowance for savings income etc. I have looked at employing her and paying a salary but the "Arctic" case is always on my mind as there really isn't any role for her here.
http://www.kiddivouchers.com/
I looked at "Busy Bees" plus another Childcare voucher provider and decided "Kiddivouchers" offered the best rates. You need to make sure your choosen nursery/pre-school accept the vouchers.
My wife is not a shareholder of the Ltd Co., so unfortunately can't pay her a dividend but do use her full allowance for savings income etc. I have looked at employing her and paying a salary but the "Arctic" case is always on my mind as there really isn't any role for her here.
Edited by Remster500 on Monday 7th April 14:23
Edited by Remster500 on Monday 7th April 14:24
Er, but the Govt lost the Arctic case ? And the promised legislation in the recent budget didn't come. So we have at least another year.
Whilst I think there is a need to be cautious, at the moment I think this is quite legal and above board.
Thanks for the link. Now that is the sort of thing I want from my accountant, proactive advice Hell, frozen, etc !
Whilst I think there is a need to be cautious, at the moment I think this is quite legal and above board.
Thanks for the link. Now that is the sort of thing I want from my accountant, proactive advice
Hell, frozen, etc !But, paying a SALARY to someone who is not working there is not quite the nub of the Arctic Systems case. That case was all about whether an individual "deserved" a DIVIDEND. There was never any assumption that Mrs Jones worked for Mr Jones' company.
The Revenue CAN challenge salaries paid to employees if they think
a) the employee is only a "paper" employee
b) the employee appears to be receiving a salary not comensurate with their position and work.
The Revenue CAN challenge salaries paid to employees if they think
a) the employee is only a "paper" employee
b) the employee appears to be receiving a salary not comensurate with their position and work.
Edited by Eric Mc on Monday 7th April 14:56
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