We recently had a client who was a traded as a limited company contractor and had a  six month break between contracts, but wasn’t sure whether he could continue to draw a monthly salary?

Even though he was out of a contract and the company stopped earning income, he would still be a director of the company and therefore he would be entitled to a salary.

In fact I would go as far as saying, you should continue taking a salary as it is tax efficient to the limited company, thus resulting in reducing your corporation tax liability.

Also, another benefit of continuing your salary is to protect your national insurance position by ensuring your salary over the course of the tax year is above the lower earnings limit threshold.

Even if you decide not to pay yourself you still have to submit your RTI returns to HMRC.

Obviously if you have no income but are paying yourself a salary then your retained earnings will reduce. The danger here is that you may not have sufficient funds in the company to run the business or sufficient amount to pay your tax liability.