Money talks

As a contractor, consultant or freelancer running your own company, deciding what you should pay yourself can actually be quite confusing.  It may seem like a daft question but it is in fact one of the most commonly asked questions for those running their own limited company.

So what salary should you take?

At the end of the day it is down to you.  What you decide to take home at the end of the month should not put you or your limited company in jeopardy.  If you are working outside of the IR35 then you can take a lower salary and add to this with the dividends.  This is a highly tax efficient way of taking your salary and income.

How much is my tax free personal allowance?

Currently this is at £7,474.  Your salary at this amount will qualify you for a sate pension as well.  It is important to make sure that you understand all of the added financial implications that come with being a limited company contractor.

Other points to consider

It is worth noting that when taking a salary you should consider what you would need when applying for a contractor mortgage or any other loan for that matter.  Often you need to demonstrate your earnings so having a relatively healthy salary will enable you to do so.  Some lenders will allow you to use your dividends to show this but often this is not the case.  If you are thinking of taking out a substantial loan in the future you may want to consider all angles.

Making sure that you have an accountant that you can contact with any questions you may have is also important.  Before you take a salary from your limited company you need to know and understand just how well your company is doing.