08000 234484 or 01923 729517
Contractors Tax Planning

Remuneration planning – helping contractors like you, to keep more of the money they earn

Download your pdf copy of the Guide

Transcript:

– Hi, my name’s Paul Meades, and if you’re watching this video, it’s probably because you’ve seen one of my blog articles relating to remuneration planning.

I keep on getting asked about remuneration planning by clients, so I’ve put together a graph to try to explain some of the basics behind it, however, it’s very important to understand that remuneration planning is bespoke to each individual because people have different personal goals, they have different costs of living, they may have different forms of income or rental income pensions, interest investment.

You also have to consider National Insurance contributions, Corporation Tax rates if you’re a business etc., but the basic starting point is this graph that I’ve put together.

Now what it shows is that for the two tax years, the 2017 / 2018 and 2018 / 2019, the changes in the rates.

So we have personal allowance going from £11,500 to £11,850, and that’s where in the UK none of us have to pay any tax at that income level.

We then have a basic rate threshold and a higher rate threshold, and you don’t need me to repeat the numbers that you can see on the screen.

A couple of areas that are really important to point out, firstly, the red section, which says parent warning zone.

That’s when start to lose your child benefits.

So if you’re earning over £50,000 pounds a year, you will start to lose your child benefit at a rate of one pound for every 100 pounds over that amount, thereby losing it 100% by the time you’re earning £60,000 pounds.

Now it’s important that you recognize that when you’re deciding how much to pay yourself out of your company, and also to consider your spouse or partner’s income if you are married or in a civil partnership.

The second red area to consider is once you have an income over £100,000 pounds, and that’s very important because you actually have an effective tax rate there of 60%, which most people don’t actually realise that’s how much the tax goes up by.

So the blog articles you’ve seen me write before are always talking about trying to get your income just on the borderline between the basic rate and the higher rate, or if you need to earn more money than that and you’re gonna be really needing to get towards the £100,000, then try not to tip over it in any one tax year.

Okay, so there are the graphs. If you want any further information, feel free to contact me, and all the best.

Hope you manage to plan your remuneration just right. Thank you, bye.

How can we help you?

Talk to our team about how we can help you plan the most effective remuneration strategy. To get started, call us on 01923 729517 or send us email.