Questions about accountant requirements

[apcarty]

Hi there,

I am an IT contractor who has just switched from an Umbrella company to my own Limited company. I have chatted to my accountant who has recommended that I pay myself a small salary and make the rest up in dividends.

I know I have to keep details of all income/expenses, however I am still confused about how and when I make income tax/NI payments (Employers/Employee) payments? Am I correct in thinking that it would be OK to pay all this at the end of the tax year (with the accountant working these out for me) or does it need to be paid when a salary payment is made??

If I do pay it monthly how can I work these out??

I apologise about what must seem as silly questions but all this is very new to me!!

Cheers
Andy.

[albion68]

Hello. Have you requested an Employees Pack from HMRC which should
contain Tax Tables Ni Tables Free Pay Tables. A Tax Period will run from
the 06 Month to the following 05 Month ie 06/09/09 to 05/10/09 you will
need to pay the HMRC Employees Tax, Employees National Insurance and
Employers National Insurance by the 20/10/09. You can work this out from
the Tax Tables, National Insurance Tables, and Free Pay Tables. It should give you a good indication in the Pack of how to work this out. Of course the
other option is to Computerise the Payroll and the Bandwiths for the Tax Rates, Ni Rates can be set up. You can make it a longer period for paying
over to the Inland revenue. It is best to ask The HMRC about if PAYE AND
NI can be submitted Monthly Quarterly or yearly but remember yearly returns
may cause to to have a big Paye and NI Bill so consider what is the best option for your business.

[apcarty]

Thanks very much for that - that helps a lot!

[James Smith]

Albions post is a complete red herring I am afraid.

From what you say IR35 is not an issue and you are a proper trading company. If so you shouldn't be paying any income tax or NI. That is the whole point of the big dividend/small salary split. Speak to your accountant in detail until you are happy with what is occurring - its your business after all, and its important you understand what's going on. That's what you pay us for!

Regards,

[apcarty]

Thanks for your reply James - I think I will give the accountant a call and clear everything up. Most things between myself and the accountant have been done verbally up to now so its possible I have misinterpreted what I am required to do.

I'll speak to my accountant and will update this thread so it may help any other newbies like myself!!

Thanks again.

[Indizine]

You pay yourself a dividend and then just enough in salary that you dont go beyond the thresholds for paying any NI or Tax.

[albion68]

Sorry about that IR35 Is as you say in Force for an IT Contractor. I was
looking at it from the perspective of General Day to Day business regarding
Paye & Ni for businesses. and that is what i offered my information based upon but in now way would i intend to mislead people i am on this forum to
help.

[Paul Norman]

Hi Andy.

James (above) is spot on. It is vital that you sit down with your accountant and get him to explain to you in non jargon words exactly how your remuneration will work, exactly how the tax will be calculated and paid.

If he is unwilling or unable to do that, you need a new accountant! But, they probably will be happy to do so.

Right from the start in your business it is very important to get all matters relating to record keeping, personal remuneration, business and personal taxation and VAT registration (if applicable) totally understood and sorted. These are not matters to be left to the end of the year.

Keeping accurate records, and doing these things well, will save you potentially a big headache later on.