10:44 AM, 26th March 2019, About 3 years ago
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 PortugalShow Book a Tax Planning Consultation
Please visit the book a tax planning consultation page to book your consultation!
Previous ArticleOnline Presentation Simplifies Tax Planning Options for Landlords
Next ArticleLodger becomes accidental tenant?
|“Account”||means an account required to access and/or use certain areas and features of Our Site;|
|“Cookie”||means a small text file placed on your computer or device by Our Site when you visit certain parts of Our Site and/or when you use certain features of Our Site. Details of the Cookies used by Our Site are set out in section 13, below;|
|“Cookie Law”||means the relevant parts of the Privacy and Electronic Communications (EC Directive) Regulations 2003;|
|“personal data”||means any and all data that relates to an identifiable person who can be directly or indirectly identified from that data. In this case, it means personal data that you give to Us via Our Site. This definition shall, where applicable, incorporate the definitions provided in the EU Regulation 2016/679 – the General Data Protection Regulation (“GDPR”); and|
|“We/Us/Our”||Means Property118 Ltd , a limited company registered in England under company number 10295964, whose registered address is 1st Floor, Woburn House, 84 St Benedicts Street, Norwich, NR2 4AB.|
|Name of Cookie||Purpose||Strictly Necessary|
|JSESSIONID||Used only to collect performance data, with any identifiable data obfuscated||No|
|__cfduid||This cookie is strictly necessary for Cloudflare's security features and cannot be turned off.||Yes|
|Name of Cookie||First / Third Party||Provider||Purpose|
|__utma, __utmb, __utmc, __utmt, __utmz||First||Helps to understand how their visitors engage with our website|
|_fbp||First||Helps to understand how their visitors engage with our website|