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Hi, I'm after some help and information about how calculations are worked out when you become self employed.
Earlier this year, I became a self employed IT contractor. Unfortunately, my contract was only a few months and finished in March 2016. I've struggled to find another contract but hoping something will come up soon. I wanted to know how the CMS calculate your payment going forward?
When I spoke to them earlier this year, they mentioned something about projected income. So if my business was turning over £50K per year, would they work out payments based on that figure or would they base it on a monthly salary I would pay myself?
I'm hoping someone on here is a contactor who can give me some advice and guidance.
Hi There,
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This would depend on whether you have set up a limited company, if you have then you would pay yourself a salary and dividens, and CMS would use those payments to work out what you would pay, if you aren't limited company, then they would look at your profit and loss at the end of the financial year that you submit through HMRC and base your payments on that.
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When I first started out self employed, they set me at a base rate for 3 months and then they asked me to file a small report directly to them which was a basic balance sheet, though that was through CSA not CMS.
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GTTS
Hi, thanks for your reply. I've set up my own limited company. Earlier this year they asked for a projected income document which I sent to them but for some reason, they never got it (either royal mail lost it or it has been delivered but lost internally). As a result of this, I have incurred missed payments as I stopped paying my ex partner in Feb and March as I stated a new contract and I had to work a month in advance and then submit an invoice to get paid 40 days later so I wouldn't have any money to pay he maintenance - long story!
Anyway, they never contacted me to chase this up and resolve the matter and they are saying that they cannot do anything now as sending in the same letter again wont change anything in their system! I feel I have been massively let down by them and their service is horrendous.
Anyway, as you say above, They would base my maintenance based on a monthly salary and then dividends? What sort of percentage do they work to in relation to dividends? For example, if I was to pay myself £600 per month and then £1k dividend each month, do they calculate it as £1600 per month? Sorry for the stupid questions as I really have no idea.
Hi There,
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They would take the wage that you pay yourself and any dividens as your income, you can't pay yourself less and then top that up with dividens, as CMS will look at both figures in effect as just one as they are both your income.
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GTTS
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