T1 Extension - Contractor (Ltd company), Zero salary

[T1_Mainframe]

Hi,

I have recently started contracting through my own limited company. Before this, I was doing a permanent job. My accountant says, based on my P45, I have already drawn minimum salary from permanent role, which will not attract any tax. Hence, I should not draw any salary to avoid tax and should pay myself only dividends in current financial year.

I am wondering if I don't draw any salary then there won't be any payslip every month. Will that cause any problem while extending? I understand dividends do count toward earnings.

Should I draw minimum wage every month to keep myself active as PAYE and ask accountant to issue Payslip?

I did use search facility but could not find answer for zero (No) salary.

Many thanks,
tm
I am director of my ltd company and have 100% shares.

[AccountantMatthew]

I don't see a problem with just taking no salary if you are looking to be as tax efficient as possible. The main UKBA concern is to prove your total income then how you structure it is up to you; as you say, you can do this with dividends alone.

For peace of mind you can take a minimal salary of whatever you want (you won't be subject to National Minimum Wage in your situation) but of course PAYE is likely to be payable and NI may be too depending on what you take out. However there really is no need.

[newbie_t]

I don't see a problem with just taking no salary if you are looking to be as tax efficient as possible. The main UKBA concern is to prove your total income then how you structure it is up to you; as you say, you can do this with dividends alone.

For peace of mind you can take a minimal salary of whatever you want (you won't be subject to National Minimum Wage in your situation) but of course PAYE is likely to be payable and NI may be too depending on what you take out. However there really is no need.

My Accountant advised me the same as well, but I opted to take minimum salary for visa extension, just to be on the safer side.

[T1_Mainframe]

Thanks to you both.

As I have already said, I have already drawn salary which will not attract salary. Which means, anything I draw as salary will attract Income Tax and NIC.

I have picked up this link from other discussion:

http://www.ukba.homeoffice.gov.uk/polic ... appendixa/

Earnings
23. Earnings include, but are not limited to:

(f) dividends paid by a company in which the applicant is active in the day-to-day management, or where the applicant receives the dividend as part or all of their remuneration package,

Here all means, a package could be only dividends (bonus). I think UKBA shouldn't have problem if my package only includes Dividends.

Can others who have been simiar situation can answer please?

Many thanks.

[AccountantMatthew]

In lieu of anyone else replying with a more personal experience, I've completed letters for people who were 'dividends only' and as far as I'm aware there were never any problems. They are certainly still in the UK(!)

All the best!

[T1_Mainframe]

Thanks Matthew.

[theroyale]

Thanks a lot AccountantMatthew your posts are very helpful!