Contracting - Ltd?

stphnstevey

hi

I am going to go contracting and was wondering the most tax efficient way to organise my tax affairs.

I while ago I looked at a Ltd and taking money out through
- Salary just under tax allowance
- Rest as dividends

However the rules have changed alot since I last looked at this.

I realise that first I need to know if I am caught by IR35, but for simplicity sake, lets just say I am NOT.

Am I right in thinking:

SALARY
- If I pay myself a salary just under 0% tax allowance, I thus pay no tax on salary

CORPORATION TAX
- 20% for my sort of turnover (after salary above taken out)

DIVIDENDS
- Pay a dividend of the rest - I beleive this is taxed at 10%, but this is already deemed as payed??? As long as I don't go above the higher tax band??

So I could get paid
- Approx 5k at 0%
- Another 35k or so at 20%
- Anything more than this at a higher rate????

Is this much better than personal taxation?

inmypocketnottheirs

stphnstevey wrote: »

hi

I am going to go contracting and was wondering the most tax efficient way to organise my tax affairs.

I while ago I looked at a Ltd and taking money out through
- Salary just under tax allowance
- Rest as dividends

However the rules have changed alot since I last looked at this.

I realise that first I need to know if I am caught by IR35, but for simplicity sake, lets just say I am NOT.

Am I right in thinking:

SALARY
- If I pay myself a salary just under 0% tax allowance, I thus pay no tax on salary

CORPORATION TAX
- 20% for my sort of turnover (after salary above taken out)

DIVIDENDS
- Pay a dividend of the rest - I beleive this is taxed at 10%, but this is already deemed as payed??? As long as I don't go above the higher tax band??

So I could get paid
- Approx 5k at 0%
- Another 35k or so at 20%
- Anything more than this at a higher rate????

Is this much better than personal taxation?

That is exactly what I do! Works for me!

I then run my own car and pay myself mileage at 40p for 10,000 miles and 25p thereafter.

stphnstevey

Are my figures correct?

stphnstevey

I'm really confused aboout dividend payments

I have been told they are paid at 10% by someone, then 19% by another????

Also if you are paid more than the higher tax allowance you pay 32,5% on dividends????

blackbooks

Hey Stephen,
Sorry, I dont have any great advice for you... but I am in a similar situation at the moment with setting up a LTD company.

What I want to know is, if you set up an LTD company just for yourself (as an alternative to being a sole trader), and you intend to pay yourself an income from it... do you need to be set up an employee with regards to P45/P35 filing etc? Or do you just withdraw money (as dividends) as you see fit? Then record them both in a tax return?

Like yourself I was hoping to pay myself a salary of 100/week, but I would refer not to hae to deal with more paperwork tha necessary... any thoughsts would be appreciated.
Thanks