Incorpuk’s Post

Most Tax-efficient Director's Salary and Dividends for 2024-25 As a limited company director in the UK, the best way to pay you is by taking a low director's salary and adding regular dividend payments. This is because allowances and tax thresholds change at the start of every tax year. That's why checking your earnings yearly is beneficial to ensure you pay your taxes efficiently. This blog will elaborate on the best director's salary and dividend format for the tax year 2024-25, from 6 April 2024 to 5 April 2025. But first, let's clarify the national insurance (NI), income, and dividend tax you need to pay on your personal income based on your earnings in the year. Learn more 👇 https://lnkd.in/d3bHXs_y

Salary vs Dividends: Understanding the Tax Implications For business owners operating through limited companies, the way you draw income can significantly impact your take-home pay. Let's compare the two main options: salary and dividends, based on a £100,000 income. Scenario 1: £100,000 as Salary ▶ Income Tax: £27,432 (assuming the personal allowance of £12,570 is used) ▶ National Insurance Contributions: £4,011 ▶ Take-home pay: £68,557 Scenario 2: £100,000 as Dividends (£12,570 as salary to use personal allowance) ▶ Salary £12,570 ▶ Corporation Tax on profits £87,430 (25%): £21,858 ▶ Dividends after Corporation Tax and Salary: £65,573 ▶ Income Tax on Dividends: £12,662 ▶ Take-home pay: £65,480 In this example, taking income as salary results in a higher take-home pay of £68,557 compared to £65,480 when taking dividends, assuming a corporation tax rate of 25%. Historically, businesses with more than one director and shareholder have struggled to allocate income effectively and fairly, as all directors/shareholders tend to want to avoid salary due to higher taxes, and income on dividends can only be split in accordance with shareholding. With the increase in corporation tax dividends are now not so favourable, depending on your income and specific circumstances. Another thing to note is the cashflow. PAYE and National Insurance on salary has to be paid to HMRC monthly. Whereas taxes on dividends are paid by 31st January following the end of the tax year. The optimal approach depends on your individual situation, future goals, and tax planning strategies. It's advisable to consult your accountant to determine the most tax-efficient way to draw income from your limited company. #TaxPlanning #Construction #Salary #Dividends

🔔 How can I save more tax? 🔔 I get asked this a lot from prospect clients. Here are 10 things you or your accountant should be considering to potentially save you money 💰: 1. Are you paying yourself the optimum salary? 2. Are you making pension contribution through the company and not in your own name? 3. Are you declaring your dividends in the right tax year? Tax planning is essential! 4. Are you maximising your dividend thresholds where you have available reserves? 5. Are you getting the perks? eg £150 per year per employee staff party even for a sole director (who says you can’t party on your own! 🥂) 6. Are you on the right VAT scheme ? This should be reviewed at least annually! 7. Are your banks and ledgers being reconciled? Having an experienced bookkeeper can save you more tax than you think! 8. Are you talking to your accountant about how best to claim for travel expenses and not rushing in to buy a car through the company? 9. Do you have more than one company and making the right pre-year end adjustment to avoid higher tax charges? 10. Is having a Limited Company the right structure for you? There are tonnes of ways a good accountant can advise you. Hopefully you've got this all covered. If not - DM me now! Ask me a tax question and I will gladly help 😃

'I want to become more tax efficient' 'How can I pay less tax?' 'SURELY there is a better way than this?' As we lay out here in this article, there is no one size fits all answer to these commonly asked questions, but keeping on top of changes in legislation (election coming up!), and keeping abreast of your business's figures are a must. Our expert team are on hand to advise on the best strategy, enabling you to stop worrying about ‘tax stuff’ and focus on what you do best. You and your business!

The start of a new financial year means updates to some fees, thresholds, levies and rates. Here is a summary of the Victorian taxation changes taking effect on 1 July 2024: https://lnkd.in/gvKSEQ72

Good break down on making that right decision

There is one common mistake I see time and time again with new clients. And it's costing them thousands in unnecessary taxes — simply because they didn't know any better. The mistake? Filing as an LLC instead of an S-Corp. If you're a sole business owner filing as an LLC, switching to an S-Corp could save you a significant amount of money. Here's why: As an LLC you pay 15.3% self-employment tax on ALL your income. But as an S-Corp you pay 0% self-employment tax on your income. The catch? As an S-Corp you're required to pay yourself a reasonable salary which does incur payroll taxes. People then ask, "don't the self-employment and payroll taxes cancel each other out"? The answer is no. With an S-Corp you're paying payroll tax on the salary you pay yourself, but with an LLC, you're paying self-employment tax on your entire income. Let me break it down: -You're filed as an S-Corp. -Your business reports $300K in net income for the year. -You pay yourself a 100K salary. In this case, you'd pay payroll tax only on the $100K salary. If you were instead filed as and LLC, you'd pay self-employment tax on the full 300K. Big difference. #SCorp #LLC #TaxSavings #SmallBusinesses #BusinessOwners #Entrepreneurship #SelfEmploymentTax #FinancialStrategy #TaxPlanning

As a business owner, it's essential to know about tax changes in the new financial year. This is true for accountants and accounts departments too. Big shifts in tax and law have happened including: 🔵 Cut in National Insurance contributions 🔵 Reduction in tax-free allowance for dividends 🔵 VAT Threshold rises to 90K 🔵 Minimum Wage Increases The article below offers an easy-to-grasp summary. This way, you'll be ready for these changes and the year ahead. #NewFinancialYear #TaxChanges #NationalLivingWage #VATThreshold

Are You Paying Yourself the Most Efficient Way? For UK business owners, balancing salary and dividends is essential for maximising tax efficiency. Here’s a quick overview: Salaries vs. Dividends Salaries: Fixed payments subject to income tax and National Insurance Contributions (NICs) but are tax deductible. Dividends: Payments to shareholders from post-tax profits, subject to dividend tax rates and no NICs. Key Changes in Legislation Corporation Tax: Rising from 19% to 25% from April 2023 (no change for 2024), with marginal relief for profits between £50,000 and £250,000. Dividend Allowance: Dropping from £1,000 to £500 from April 2024. Income Tax Threshold: The highest rate 45% (48% in Scotland) threshold lowers from £150,000 to £125,140 from April 2023 (no change 2024). There is a new tier for Scotland of 45% between £75,001 - £125,140. Strategic Insights: Basic Rate Taxpayers: Dividends are usually more tax-efficient. Higher & Additional Rate Taxpayers: Bonuses might be more beneficial due to full deductions and NIC advantages. Takeaway: Review your income strategy considering the tax rates. While dividends have been a go-to for tax efficiency, new rates make it essential to reconsider the best mix for your situation. There is no one-size-fits-all approach when it comes to paying yourself as an owner of a business. Deciding whether to pay yourself a salary or dividends depends on a range of factors, such as the CT rate, the profile of the company and its shareholders. #FinancialStrategy #UKTaxpayer #SalaryVsDividends #TaxEfficiency 

There have been several recent cases where clients/PAYE employees were surprised by the amount of tax they paid after crossing the £100K threshold. Most of them didn't realise that in the "marginal zone," they were paying taxes at a rate of 60%. If they had known, they could have taken action, such as contributing more to their pension, to reduce their tax burden. So, if you earn over £100K or are approaching this threshold, we recommend that you take a moment to read through this blog. And, of course, don't hesitate to get in touch if you need any assistance. #uktax #taxplanning #higherearner #taxrates #payroll #paye https://lnkd.in/esb7EsNz