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Tax Efficiency

Tax Efficiency

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Hi Guys,

Would it be more tax efficient for a contractor to have a basic salary of £8924 instead of £12500 to save on the NI (employee and employer) or are they better off just paying the NI? Any other benefits of paying the NI?

Thanks guys.

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By Matrix
01st May 2019 16:34

If no employment allowance then pay at the PT (which is lower than the figure in your post).

The contractor may aswell make the most of not paying NI when they don’t need to which is all set to change under the off payroll rules.

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Replying to Matrix:
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By Maslins
01st May 2019 16:43

^^this. Also has the benefit that net pay consistently equals gross pay, so PAYE/NICs is a liability the client can completely ignore. RTI submissions are still required though.

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Replying to Maslins:
RLI
By lionofludesch
01st May 2019 17:08

Yep. Agree with the above.

Better to pay 12% NI than 19% CT.

But 12% + 13.8% (less 19% relief) isn't as good.

So for £12,500 to be better, a company would need to be able to claim EA - but not the whole £3,000.

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By GR
02nd May 2019 06:12

If you are a contractor I would recommend that you get your IR35 status check by Qdos, Bauer and Cottrell or Abbey Tax. This is because there are some big changes heading your way in April 2020 and you should probably start thinking/planning for these changes now.

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By GR
02nd May 2019 06:12

If you are a contractor I would recommend that you get your IR35 status check by Qdos, Bauer and Cottrell or Abbey Tax. This is because there are some big changes heading your way in April 2020 and you should probably start thinking/planning for these changes now.

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By paul.benny
03rd May 2019 10:15

NI gives the worker entitlement to state pension and contribution-based benefits.

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Replying to paul.benny:
RLI
By lionofludesch
03rd May 2019 11:25

paul.benny wrote:

NI gives the worker entitlement to state pension and contribution-based benefits.

But you can get those for free.

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