Salary Guide for Limited Company Contractors
Most Limited Company Contractors remunerate themselves through a mix of Dividends, Reimbursed Expenses and PAYE Salary. By minimising salary payments and maximising dividends it is possible to achieve a significant tax advantage over straight payroll solutions.
If you are a highly skilled professional and you are considering going into business with your own Contractor Limited Company Commonwealth Contractors can help. We partner with Chartered Accountants who specialise in contractor accounts and can help to maximise your net contract retention.
To speak to an experienced advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!
Why take a Salary?
Although there is no legal requirement to take salaried income from a Contractor Limited Company you should still set one (and at a satisfactory level) in order to maintain credits towards your State Pension Entitlement which is dependent upon National Insurance Payments. It is also wise to take at least a small salary in order to avoid any unwanted attention.
Please note that as a Director you are not required to take a salary however non-directors are subject to minimum wage laws and must take at least minimum wage as a salary payment each month.
Setting a Salary
The level at which you set a Contractor Limited Company Salary is entirely up to you however most contractors set a £12,000 per annum base salary (£1,000 pcm). At this level you will;
- Make qualifying National Insurance Payments towards your State Pension Entitlement, AND
- Receive salaried Income above the National Minimum Wage (NMW), AND
- Potentially make it easier to qualify for a Mortgage or Personal Loan, AND
- Take a step towards ensuring that your Salary to Expenses ratios are proportionate
As a Limited Company Contractor the way you structure your income depends upon the IR35 status of the contract you are working further to. If the Limited Company is engaged on a contract;
Outside IR35 – You can set a low salary (normally around £12k per annum), claim substantial business expenses and take dividends from the company (which thereby avoid large national insurance contributions
Inside IR35 – You have to take all contract income in the form of salary (which attracts income tax and class 1 Employers and Employees National Insurance). You can also claim 5% of company revenue as administration expenses plus site based expenses such as travel to and from the site
To discuss IR35 status and contract income speak to an experienced Commonwealth Contractors advisor now!
Find Out More
To find out more about Contractor Limited Companies and to discuss your situation with a professional advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!