Salary vs Dividends
If you own a limited company business, you have undoubtedly considered whether you should take a salary or dividends or both. But following the last couple of budgets the landscape for deciding on salary or dividends has changed. Corporation tax rates have increased, and national insurance has decreased. The strategy will not be the same for every business owner and your sweet spot may well have changed this year.
Factors to consider are:
The levels of company profits: The corporation tax rate now increases on profits over £50,000.
The levels of the business owner’s other income: The personal allowance is no longer safe on income over £100,000.
Employer’s national insurance allowance: The employment allowance of £5,000 (applied to
employer’s national insurance) is not available
to sole directors with no employees. Employer’s national insurance becomes payable on salaries
over £9,100 per annum.
National Insurance rates: The levels of salary as employee national insurance is now at a rate of
8% rather than 12%.
Tax-free dividend allowance: The tax-free dividend allowance has halved again and is now £500.
Salary vs Dividends with Essendon
If you want to discuss salary vs dividends for your business, contact the Business Godparents at Essendon today. We can discuss your best options and how to get the most for your business and your own personal gain.
