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Salary :
The level of salary to pay is something you will need to decide. Assuming that the IR35 rules do not apply to your contract, the two main options are whether to pay at the level of the tax & NIC free allowance (£5,715 for 2010/11) or a salary at the level of the National Minimum Wage (NMW).
Currently, the NMW is set at £5.80 per hour, so based on a typical 37.5 hour week, this would equate to an annual salary of £11,310. Paying an extra £5,595 as salary will mean that you will pay PAYE of £967 and employees NIC of £615, adding in the employer NIC of £716 makes an extra £3,398 payable to HMRC.
However, paying a higher salary would attract Corporation tax relief of £1,325, so the net extra taxes payable would be £973. (967+615+716-1,325).
Clearly you would need a very good reason to pay the extra £973 in tax each year.
The NMW applies to all employees although HMRC have stated that they would not seek to enforce it for directors of a company. So this appears to be an option to pay a salary at just £5,715. However, where there is a contract between the director and his company, the NMW would apply.
Provided that there is no written employment contract, HMRC will not seek to assert that there is an unwritten or implied contract.
All our clients are free to choose the rate they wish to have as a salary, apart from the tax savings, you may need to consider a higher salary if you make personal contributions, although this issue can be solved by making company contributions.
Contact the office for details
Tawanda EU Ltd Accountants
24, Milner Road, Gillingham,
Kent ME7 1RB,
UK
Phone + 44 787 296 2016
Email info  tawanda.co.uk
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