paying yourself a Salary

[Heaven Scent]

Hi - I mentioned before that another minder from here & I went to a meeting last week about Early Years Funded Places and the man from the management company there said we could pay ourselves a Salary as an expense - I just spend what I have left each week having made allowances for Tax and NI on myself and my family or save some etc.

[sarah707]

I think everyone in the room was like us and just uses whatever is left at the end of the month.

I wonder if there is an advantage to taking a salary? I can't find one myself...

Anyone any ideas? :D

[Mouse]

This has come up at every business course I've ever been on. These consultancy firms tell us we can pay ourselves a salary, but an accountant I know has explained to me why you can't - I just can't remember what the reason is!

I'd like to know who is right.

[Pauline]

How can you pay yourself a salary when you are self employed? I don't get it.

What is left at the end of the week is your profit, if you take that as a salary and put it down as an expense then you would have no profit to put down on your tax return. :huh:

[button68]

I know there is a complex tax thingy where........

If you are self employed and register as a Limited Company then you can pay yourself a salary each month. A wise man/woman would pay themselves just enough to keep them below the tax threshold :cool: .

You have to pay Corporation Tax on what it left as this is 'Profit'. It varies but corporation tax is around 18%.

You then pay this profit to yourself as a 'Dividend' (can also be paid monthly). Dividends are tax free ;)

[Mouse]

I know there is a complex tax thingy where........

If you are self employed and register as a Limited Company then you can pay yourself a salary each month. A wise man/woman would pay themselves just enough to keep them below the tax threshold :cool: .

You have to pay Corporation Tax on what it left as this is 'Profit'. It varies but corporation tax is around 18%.

You then pay this profit to yourself as a 'Dividend' (can also be paid monthly). Dividends are tax free ;)

Surely if you paid yourself a salary you'd have to pay tax & NI if it was over the limits? And you'd have to declare yourself emplyoed & self employed...how messy would that get?!

DH says you can't pay yourself a salary if you're self employed. You can take drawings, but not a salary.

[Pipsqueak]

NOOOOOOOO:panic: too complicated for me:panic:

[button68]

Nope, you are SELF EMPLOYED this is why you are paying your self (we ALL pay ourselves - usually our profit each month ;) ) But instead taking the whole of the profit you only take enough to keep you below the tax threshold. You'll still pay NI - class 2.

Also you need to have your company registered at Companies House etc... probably not ideal for the buisness of childminding - unless you are in the Big League :D

I don't do it BTW - I am soooo little leauge it's untrue :blush:

[Alibali]

I'm confused:confused: :confused:

[TheBTeam]

I know there is a complex tax thingy where........

If you are self employed and register as a Limited Company then you can pay yourself a salary each month. A wise man/woman would pay themselves just enough to keep them below the tax threshold :cool: .

You have to pay Corporation Tax on what it left as this is 'Profit'. It varies but corporation tax is around 18%.

You then pay this profit to yourself as a 'Dividend' (can also be paid monthly). Dividends are tax free ;)

Pretty much what i was going to say, my sil is self employed but through a limited company and this is what she does but her income is in the 100s of thousands, it is not worth the extra work involved for us as childminders i am pretty sure.

[Hebs]

I'm confused:confused: :confused:

me too, can someone translate?? :laughing:

[Heaven Scent]

Yeah - Ok just what I thought - I was just so baffled by what he said that I just had to ask - the more I thought about it the more it seemed to be ridiculous.

We were actually given a form with this on that we have to complete - I just don't think this Management consultancy did their homework before they came to the meeting - in fact I know they didn't.

He also said that we could claim more wear and tear on top of our usual 10%for some reason. I think that would be if something expensive got damaged and the 10% didn't cover it.

[Mouse]

Yeah - Ok just what I thought - I was just so baffled by what he said that I just had to ask - the more I thought about it the more it seemed to be ridiculous.

We were actually given a form with this on that we have to complete - I just don't think this Management consultancy did their homework before they came to the meeting - in fact I know they didn't.

He also said that we could claim more wear and tear on top of our usual 10%for some reason. I think that would be if something expensive got damaged and the 10% didn't cover it.

I think very often these agencies just haven't got a clue how we work.
They don't understand that we don't work like other businesses.

We had on bloke a while back who was telling us that we should work out exactly how many hours we work a week including paperwork, cleaning up after children, training, studying etc etc, times that by minimum wage, then divide that by the number of hours we childmind. This would give us the amount we should charge parents. He just didn't understand that if we doubled our fees, parents just wouldn't pay it & we'd have no work! Same with qualifications. He said we should charge a lot more if we were qualified & wouldn't believe that parents wouldn't pay a huge amount more just because their childminder had an NVQ.

[huggableshelly]

translation done in Shelly style

childminder : self employed providing a service to others claiming profit as earnings not classed as a limited buisness therefore not paying company house a yearly fee but we pay Ofsted a yearly fee instead.

my bro : self employed providing a product/service paying company house a yealry fee and is a shareholder to his own buisness (not sure what that does) but he then pays himself a salary and uses rest of the profit to buy new stock ready for resale. Capital gains is different too.

I did my books, helped him do his, almost went bald LOL but finally worked out the differences enough to complete his tax return with no hicups.

hope that helps or atleast doesnt cause more confusion lol

[Winnie]

I used to draw an amount each week as a 'wage', the only benefit was that my bank balance grew because i was limiting the amount i took out rather than just spending evey spare bit of money. Not the same a paying myself a salary.
I'm not earning enough to draw anything for me personally anymore :( i just spend whats left over on resources and other expenses.

[Chatterbox Childcare]

I am going to investigate this one - sounds complicated and may take a bit of time but I will be back..

[Beckieboo]

Absolutely baffled!!!.................................... But then it doesnt take much!!!! :laughing: :laughing:

[jumpinjen]

tax man told me that as self employed your profit is your salary, you can't pay yourself £400 a month or something and claim it as an expense.

So, the consultancy man was wrong!

jen x

[Chimps Childminding]

We were told on a course a few years ago that you could pay yourselves a salary - so we did (to keep from paying tax) !!! :clapping:

Then we read somewhere that we couldn't so we stopped cause we didn't want to have the tax man knocking on the door!!!!:eek:

Now I don't know what to do :panic:

[jumpinjen]

The thing is, if you pay yourself X hundred every month as salary, then your business at the end of the tax year makes nil or is at a loss, then you pay no tax on your business..... great!

BUT - are you paying tax on your salary that you are drawing from the business? If you aren't then you could be breaking the law.

You are best off calling your own tax office to check and record the name of the person that tells you and the time/date of the call etc, then you are covered!

Jen x

[estrelas]

:panic: :confused:

:laughing:

[jumpinjen]

About which bit???!!!!

jenni x

[PixiePetal]

Think I will stick with what I have been doing for the past 15 years :thumbsup:

Keep it simple :)

[button68]

Don't forget the example I gave was regarding a Limited Company - none of us are registered as limited companies.

[ManicMum]

You could set yourself up as a limited company but you would then have to draw salary as an employee of the company plus your National Insurance would be deducted. The company would then have to match the employee's national insurance contribution too. You can pay yourself with a dividend at 10% tax instead of salary. There is then corporation tax at 18%. Your head then explodes!!

I was told that it isn't really cost effective unless you are on at least £20 hour, so that probably rules most childminders out!

Much easier as a sole trader. Just do tax return each year.

[Mollymop]

How can you take your salary out as an expense when what we have left over (profit) IS our salary! ha

[Heaven Scent]

Gosh this has certainly opened a can of worms hasn't it:laughing: Silly man I'm sure people think we can claim for all sorts - its would probably be hard enough to prove we are within our rights to claim for what little we do claim for - I also bet half of us don't claim for everything we can - I bet there are loads of bits and bobs that go unclaimed for like treats bought when out etc - I know a minder who doesn't put half of what she spends on her mindees through the books and boys she can spend loads on a certain few.

[Chatterbox Childcare]

I am still asking questions so watch this space!

[Ritaroo]

I went to a Tax and NI briefing for childminders last night and the lady from the tax office who was taking the course said that you definately CANNOT claim a salary as an expense. Which does make sense otherwise why would any self employed person ever pay tax you would just claim all the money you made each month as as your salary and never show a profit.

She was very clear on this point so I am guessing it is a no no I am afraid. Sorry to be the bearer of bad news.:(

[Emz]

Sounds complicated :eek:

[Heaven Scent]

Oh its not bad news - its just what I thought - I don't know where this man from the management consultancy got his facts now I know its airey fairey land.