Why pay £5k salary instead of £5,435?

Why pay £5k salary instead of £5,435?

Didn't find your answer?

Why pay only £5,000 salary? I've read all the comments I can find on low salary + dividends & can't understand why people aren't taking a salary as close to the personal allowance as possible. For tax year 2008/09, personal allowance is £5,435 & NI (for both employee & employer) would be payable at £5,460 (£105 x 52 weeks). I'm intending paying a salary of £5,400 - can anyone see a problem with that?
Brian

Replies (10)

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By skylarking
20th May 2008 15:37

Yes Trevor . . .
You are missing something.
I think you must be looking for humanresourcesweb

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By User deleted
19th May 2008 19:55

Thanks
thanks for all comments, much appreciated.

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By User deleted
06th May 2008 13:12

£7.35!
Wow. I’d be so chuffed if you could save me that – you’re welcome on the next series.

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By Ronnie Stanley
06th May 2008 08:55

No need to pay to claim
A salary above the lower earnings limit but below the earnings threshold means PAYE returns must be filed.

File online & claim a cheque for the incentive payment. (No need to pay any PAYE/NI to claim.)

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By User deleted
05th May 2008 19:58

Dont forget the incentive
Also file online and make sure a small amount of tax / nic are paid and claim the online incentive !!

Why not !!

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By thehaggis
05th May 2008 16:16

Not Laziness, Neil

If you pay £5435 on 6 April you really should tax it because it is "Month 1" - there is no annual earnings period for PAYE tax as there is for NIC.

Doing it your way increases paperwork because each month you will need to operate PAYE to give effect to the refund arising from the cumulative tax code, and, since you have should have paid the tax to HMRC, you will need to obtain monthly (or quarterly) refunds.

Credit the DLA in month 12 to avoid this.

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By geoffemtacs
05th May 2008 10:27

Sluggish advice-givingq
The problem is that for the last 5 years or so we've had a Paersonal Allowance that was 'about 5 grand'. When you're explaining the whole scheme of things to punters, you talk about £5K ish of salary with the balance in dividends, which made sense with a PA of £4,845 or £5,035 but less so with £5,435.

Give it another yearor so and we'll all spend the next 5 years talking about wages of 6 grand and £500/month.

Some of us have maginally better things to do with our lives than saving really small amounts. Don't forget to factor in the time cost of regular changes to the band standing order that pays the wages!

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By AnonymousUser
05th May 2008 09:12

Only one right amount?
The original poster pays less than the personal allowance, costing unnecessary corporation tax, whilst one of the commenters pays more than the personal allowance, paying unnecessary employer and employee national insurance contributions.

Surely there is only one correct amount - a salary exactly equal to the personal allowances.

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By NeilW
05th May 2008 07:33

No problem at all - but pay the full amount
My advice is to issue an annual 'honorarium' salary payment of exactly the personal allowance on 6th April every year - simply by increasing the directors loan account by that amount. You can then draw it down as cash becomes available.

Doing it that way eliminates the majority of the paperwork completely (you still have to do the end of year returns unfortunately, and forward some tax if you don't have a full unadulterated tax code). Why people persist with monthly payslips I can't understand, and I can only put it down to ignorance of the rules, laziness or just pumping the work up so that they appear to be doing something for their fee.

Why not pay the full £5435? That £35 is costing you £7.35 in tax you probably don't need to be paying.

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By User deleted
04th May 2008 17:22

We're paying the full amount
We're paying the fulls amount plus a few pounds - 11 x £450 plus 1 x £490 resulting in no paye and 55p NI.
We re-calculate this every year depending on the personal allowance.
Hope that this helps.
B

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