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Tax credits when dele employed - help???

(13 Posts)
Slowprogress Wed 23-Mar-16 14:01:39

Hi

I am just in the process of setting up my own company and about to start trading, I will need to inform tax credits.

Can anyone that is self employed give me any advice? When I looked online it asked my profit for the previous year - there was no profit as it is anew company.

I am thinking of starting by paying myself a very low salary of £400 per month and then when the first bits of work come in I can increase it, does this sound the best way of doing it?

Also when I say paying myself £400 it won't actually be paid just put through the paye system and owed to me!

MangoBiscuit Wed 23-Mar-16 14:05:29

Watching with interest as I'm in a similar situation.

And good luck with your business!

Slowprogress Wed 23-Mar-16 15:10:17

Thank you mango smile good luck with your business too!

It's very exciting but lots to learn too!

lougle Wed 23-Mar-16 16:56:49

You can't pay yourself on paper only. That's fraud. You either take a salary or you don't.

simplydivine05 Wed 23-Mar-16 18:21:10

It is many years since I claimed tax credits so things may have changed, but if you are just a sole trader you don't pay yourself a qage, and it is literally income minus out goinga equals your pay and this is your "wage". You cannot withold cash for the business unless you have a limited company set up. You tell tax credits your estimated earnings and then at the end of the tax year give them the actual figure. To prevent over payment you are best giving them an updated estimate regularly.

Lighteningirll Wed 23-Mar-16 18:23:30

You need to give them an estimated earnings then update with your year end and get tc adjusted like simply says

jamtartandcustard Wed 23-Mar-16 18:35:46

Not self employed yet (well kinda, started a new business last week so very very early days) but my husband is on a 0 hour contract and we had to give an estimate of what we thought he would earn. Try and be realistic. Over estimating will mean you don't get enough tc but underestimating will mean you have to pay back next year. Also they will want to know how many hours you expect to work each week as well

MangoBiscuit Thu 24-Mar-16 06:27:17

My understanding with the PAYE thing for a limited company is that you can pay yourself an amount each month, or ad hoc, then either take the money out, or choose to re-invest it. As soon as you've been "paid on paper" the company no longer owns that money, you do, but you can choose to put it back in again, or take it out later. Keep an eye on the yearly total, as at £8060 you'll need to pay both NIC and employer contributions.

Slowprogress Thu 24-Mar-16 07:17:53

Lougle - I may not have worded that well, I meant for the first few months I would pay myself on paper only as there would not be any money in the business account to pay myself with! Once there is money I will be transferring it to my account!

Slowprogress Thu 24-Mar-16 07:20:41

Thank you all for the advice, I will estimate and then look at it again in 3 months as hopefully there should be a change by then and I should be earning abit more money if all goes well smile

AgainstTheGlock Thu 24-Mar-16 07:21:43

You just tell them what you expect to take as profit over the course of a year. It depends on largely how successful you think you will be. That's all there is to it, you'll do your tax return online and it'll all be reconciled. My advice would be to look closely for the sweet point of maximum tc until you are earning so much it's irrelevant.

witsender Sat 26-Mar-16 21:19:25

I don't get this either. Dh has just set up a ltd company, it bills x per hour. So far he hasn't laid himself anything from it as there are costs from set up to be repaid. But we need to look at tax credits as we are stony broke! So can he pay himself something and leave some in the company account? As some months will be leaner than others obviously. And claim on the hourly rate that he 'charges' his limited company?

Kanga59 Sat 26-Mar-16 22:59:33

paHey is all real time now so you can't just PT on paper that up pay it

will you be a sole trader or ltd company. The tax credits will apply differently to each. For a Ltd company it will be based on your salary+dividends.

what was your income for 2015/16?

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