Question :
We are wanting to know if it is better to pay ourselves as contractors or take wages?We are a building construction company.

Question submitted 21/09/20 @ 12:04pm
Industry: Business Growth
  • This advice is given on the basis that your business is a limited liability company and you are 100% shareholders (jointly or severally). From my experience as a business owner, it was best to take drawings and then work with your accountant at the end of each year to determine how best to treat this. We agreed on a set amount each week/fortnight which was roughly equivalent to the net value (gross less PAYE tax) of what we would have paid ourselves as an employee. This way we could forecast our cash flow needs etc and have discipline when it appeared that we were “flush” with cash but really it was needed for future costs.

    It does mean that you are likely to need to budget for tax payments in defined tranches rather than PAYE that is paid monthly. You can not really pay yourselves as contractors if you are working in your own business because if this is more than 80% of your personal income, then the law determines that you are actually an employee and therefore the company can be liable for all employee related costs like ACC, leave, PAYE etc.

    Please feel free to send through a follow up question if this has raised more.

    Thank you for your reply it is much appreciated.

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