Don’t forget to declare your Directors salary by 5th April

by Mark Alexander

10:44 AM, 26th March 2019
About 4 weeks ago

Don’t forget to declare your Directors salary by 5th April

Make Text Bigger
Don’t forget to declare your Directors salary by 5th April

Tax Efficient Extraction of Profit From Companies For 2018/19

For many years accountants and tax advisers have suggested that director/shareholders should extract profit by paying themselves a low salary with the remainder of their income being extracted in the form of dividends.

Although dividends are not deductible in arriving at the company’s taxable profits, they do not normally attract National Insurance Contributions (NICs). The starting point of NICs rose to £162 a week from 6 April 2018. This is now significantly lower than the £11,850 personal income tax allowance. A salary just below £162 a week, £8,424 a year would mean no NIC would be due but would be sufficient to count as a qualifying year for State Pension purposes (if above £6,032 lower earnings limit).

Remember that employers other than those where the director is the only employee are entitled to a £3,000 employment allowance that can be set against employer’s NICs. If this has not been utilised against NICs on staff wages then consider increasing the directors’ salaries up to £11,850, as the additional salary would save corporation tax at 19% on the £3,426 extra salary which equals £651, whereas the employees NIC would be £411.

As far as the level of dividends is concerned, the rate of tax changes from 7.5% to 32.5% at £46,350 so ideally the dividends should not exceed £34,500 if a salary of £11,850 is paid. The first £2,000 would be taxed at 0% with £32,500 being taxed at 7.5%. Remember that this tax will then be due on 31 January 2020.

For lots more tax related articles please CLICK HERE 

If you’re thinking of treating yourself to a new car tax efficiently you might also find THIS RELATED ARTICLE interesting.

And if you fancy a life of no income tax at all and a lot more sunshine, please see this linked article which explains Why UK landlords are flocking to Portugal

Show Form To Book A Tax Planning Consultation
Consultations include new client compliance checks, fact find via email with complimentary software, expert analysis, a detailed written report and recommendations and a 30 minute Q&A session via Skype or telephone. We GUARANTEE total satisfaction or a full refund.
  • Please provide an overview of your circumstances and what you are looking to achieve.


Comments

What on earth are you waiting for?

Landlord Incorporation Checklist

Landlord Incorporation Checklist

Landlord Tax Planning Webinar LLP’s

Landlord Tax Planning Webinar LLP’s

Partnership taxation and associated rules

Partnership taxation and associated rules

Landlord Tax Planning Analysis Software

Landlord Tax Planning Analysis Software

Guide for landlords on forming an LLP for property investment

Guide for landlords on forming an LLP for property investment

Beneficial Interest Company Transfer Structure Explained

Beneficial Interest Company Transfer Structure Explained

Substantial Incorporation Strategy Scotland “SISS”

Substantial Incorporation Strategy Scotland “SISS”

Tax Planning – What on earth are you waiting for?

Tax Planning – What on earth are you waiting for?

Capital Account Restructure – Case Study

Capital Account Restructure – Case Study

Guide To Forming A Property Partnership

Guide To Forming A Property Partnership

HMRC Internal Manuals ‘Landlord Incorporation’

HMRC Internal Manuals ‘Landlord Incorporation’

IHT Legacy Planning For Landlords – CASE STUDY

IHT Legacy Planning For Landlords – CASE STUDY

Landlord Tax Planning Presentation in PowerPoint and PDF

Landlord Tax Planning Presentation in PowerPoint and PDF

Mixed Partnerships For Tax Planning Purposes

Mixed Partnerships For Tax Planning Purposes

Freezer Shares – an IHT planning structure for owners of Property Companies

Freezer Shares – an IHT planning structure for owners of Property Companies

Stamp Duty when transferring the ‘whole business’ of a Partnership into a Limited Company

Stamp Duty when transferring the ‘whole business’ of a Partnership into a Limited Company

Hallmarks of a property rental BUSINESS

Hallmarks of a property rental BUSINESS

Tax Planning With Alex Caravello

Tax Planning With Alex Caravello

Hybrid Tax Structure – Landlords BEWARE!

Hybrid Tax Structure – Landlords BEWARE!

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More