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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

As a director of a limited company, you decide how much to pay yourself in order to maximise tax reliefs and minimise your tax bill. Most limited company directors pay themselves a combination of salary and dividend. The way you structure you director’s remuneration to be the most tax efficient will depend on your own circumstances and the number of directors and employees your company has. Find out about the most tax efficient director’s salary in 2024/25 and the changes to tax thresholds and rates beginning on 6th April 2024. Read more - https://lnkd.in/ea6tvBtT #directorssalary #dividend

As a director of a limited company, you decide how much to pay yourself in order to maximise tax reliefs and minimise your tax bill. Most limited company directors pay themselves a combination of salary and dividend. The way you structure you director’s remuneration to be the most tax efficient will depend on your own circumstances and the number of directors and employees your company has. Find out about the most tax efficient director’s salary in 2024/25 and the changes to tax thresholds and rates beginning on 6th April 2024. Read more - https://lnkd.in/eS-Z4mCz #directorssalary #dividend

Although the first late payment of PAYE in a tax year will not result in a fine, failing to make subsequent payments on time will result in financial penalties, with interest also being applied to the amount outstanding on a daily basis. Penalties are calculated as a percentage of what is owed, and increase depending on how many times you’ve paid late within a tax year. The current penalty rates are as follows.. https://lnkd.in/eq_5GH33

Although the first late payment of PAYE in a tax year will not result in a fine, failing to make subsequent payments on time will result in financial penalties, with interest also being applied to the amount outstanding on a daily basis. Penalties are calculated as a percentage of what is owed, and increase depending on how many times you’ve paid late within a tax year. The current penalty rates are as follows.. https://lnkd.in/e77DTWgd

Although the first late payment of PAYE in a tax year will not result in a fine, failing to make subsequent payments on time will result in financial penalties, with interest also being applied to the amount outstanding on a daily basis. Penalties are calculated as a percentage of what is owed, and increase depending on how many times you’ve paid late within a tax year. The current penalty rates are as follows.. https://lnkd.in/e56nQhUP

🔔 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 😃

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

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