Tier 1 Extension Query

[middletier 1]

Hi,

I am due of my tier 1 extenstion this October

I am a contractor and having own limited company. I am takig min. salary as £ 601 and quarterly dividend as £10k, hence i ok with my earnings to claim points for earnings.

As i am taking min salary and not paying any taxes, thus i am thinking do increase my salary to 1000 pm and pay some taxes. by doing so is there any benefit for extenstion. The reason why i am asking is some contractors saying that its better to pay some taxes.

Thanks

[AccountantMatthew]

It's up to you middletier 1. As a director you will be in control of what dividends are paid and as the employer you will set salary levels.

Providing that you meet/can prove what you are claiming as previous earnings then that's going to be the concern of UKBA. The other factor, of course, is that you are complying with any tax responsibilities. So that means you are paying the correct amounts of tax and are filing everything that you should do rather than whether you are paying a certain amount of tax/NI.

To be honest at £601 pcm you will be owing Class 1 National Insurance (for 2011-12 this 'minimum' level where no tax or NI is payable is £589 pcm) and if you are taking quarterly dividends of £10k then some of your total income will fall into the higher rate tax bracket so there will be an additional income tax liability.

[middletier 1]

Hi AccountantMatthew,

Many thanks for your valuable information.

yes my total income comes under higher tax bracket, so i will stick to my salary as min. 601 only. anyway i am paying taxes so i undrstood and think dont need to increase salary and pay taxes for that as well.

Thanks