PAYE and IT Contracting

john3:16

HI,

I'm working as an IT contractor under my own ltd company I setup last August. I'm seeing my accountant in March to work out my tax due etc..

I've earned around 5,000 + VAT per month (voluntary VAT registered) over the last 6 months. Prior to that I was in full-time employment elsewhere. I've been doing my VAT returns and all is up to date here.

I believe that my PAYE is due in April 08 for my (IR35) income this tax year. How much of my income over the last 6 months goes to PAYE ? and how much is going to be treated as company profit/dividends? I'm a bit confused about these.

Thanks
Gerry

adypem

john3:16 wrote: »

HI,

I'm working as an IT contractor under my own ltd company I setup last August. I'm seeing my accountant in March to work out my tax due etc..

I've earned around 5,000 + VAT per month (voluntary VAT registered) over the last 6 months. Prior to that I was in full-time employment elsewhere. I've been doing my VAT returns and all is up to date here.

I believe that my PAYE is due in April 08 for my (IR35) income this tax year. How much of my income over the last 6 months goes to PAYE ? and how much is going to be treated as company profit/dividends? I'm a bit confused about these.

Thanks
Gerry

The amount of PAYE will depend on what salary your accountant has deemed you to be on ?
If your contract is inside IR35 then all of the 30k will be classed as deemed salary and you will have to cough up.
If you fall outside, then you could/should draw a small salary of say 6k/pa and the PAYE will be less than £100 I think.

Company profit will is turnover - expenses - salary.

The above is a rough idea, but I'm not an accountant.

Hope this helps

john3:16

Yes thanks.

Presumably my mileage allowance under my IR35 income is also applicable for the April08 calculation?

Thanks
Gerry

Pennywise

Get back to basics - are you caught by IR35? HMRC like to make out that all contractors are caught, but the reality is that they have lost the vast majority of cases where they have claimed this. Get your contract and working practices properly reviewed by IR35 experts (Accountax, QDOS, Bauer&Cotterill, etc) - "some" accountants are playing too safe and telling virtually everyone they are caught!

Little_Mama

Also worth looking at the PCG website and their guides to IR35 and Freelancing.

LM