- Have you received a new tax code for 2017-18 from HMRC?
- Real Time Information (RTI) and what this means for you?
- What to do now?
- I need a salary of £X amount due to pension requirements?
- What if I don't want the salary you recommend?
- I do not believe I have any salary at all being run for me, what should I do?
- So taking this salary into account, what dividends should I pay?
- Additional Tax Rate
- Child Tax Credits
- High Income Child Benefit Tax Change
Real Time Information (RTI) and what this means for you.
We will be filing your monthly RTI submission to HMRC on your behalf. This submission informs HMRC what salary you are paying yourself and what PAYE and National Insurance (NI) is due in ‘real time’. If there are any changes to your salary and you stop following your salary schedule, you must inform us immediately. Failure to do so could result in HMRC issuing you with a penalty and interest for an incorrect submission.
Your Salary Schedule will detail the dates by which you have to pay your net salary to yourself and the date you need to pay HMRC by for any PAYE and NI that is due.
What to do now?
For the tax year 2017-18, you will be provide a Salary Schedule by early April. We will confirm to you the amount of salary to pay to yourself monthly. You could set up a regular monthly Standing Order to pay this to yourself. You will be advised of the associated PAYE and NIC payments needed on the same schedule, as well as respective due dates along with instructions on how to pay these amounts to HMRC.
However, rather than taking additional salary to personally support larger pension payments and therefore suffer the tax on it, you should consider making pension contributions through your company which will save you Corporation Tax and is a tax efficient way of extracting funds. We can put you in touch with an Independent Financial Advisor who can discuss the options for you and your company.
What if I don't want the salary you recommend?
Salary requirements are always specific to your circumstances and if you wish to be paid another amount please email us to discuss. We will transfer you on to the recommended salary unless we hear from you.
I do not believe I have any salary at all being run for me, what should I do?
If you started your company part way through the last tax year it may not have been tax efficient to commence paying a salary at that time and you may have only been drawing dividends to date. As the new tax year commences it may now be appropriate to commence with a salary. Please contact us to discuss what the best course of action for you is.
If you do have any other income, please contact us to discuss the dividends you have available for 2017-18 and also your potential personal tax liability. We will discuss with your individual circumstances and advise the most tax efficient salary. We will also discuss with you the tax efficient withdrawal of dividends.
If you are concerned that our recommended salary may lead to future difficulties in acquiring mortgage funding, please do not worry. We have built up a strong relationship with a firm of Mortgage Brokers who specialise in contractor mortgages who take a different approach to proving affordability for funding. Get in touch if you would like more information regarding this.
Additional Tax Rate
The Additional tax rate applies to all income over £150,000 per annum - additionally there are restrictions to your personal allowance once income is over £100,000 per annum. If you believe that your overall income, for the year to 5 April 2018 will exceed these limits please contact us to discuss the potential impact.
Child Tax Credits
If you are in receipt of child tax credits (Universal credits) then it is also important that the number of hours you work are correctly included on your RTI submission. If the hours are incorrectly declared you could lose your tax credit payments. Please contact us and let them know how many hours you are working or if you would like to discuss this further.
Please do not hesitate to contact us for any further information.