Massey Accounting Company

making your business less taxing


3 Comments

COVID-19 Job Retention Scheme: Advice for Company Directors

Coronavirus (COVID-19) Job Retention Scheme – Advice for Company Directors

The critera to qualify for the COVID-19 Job Retention Scheme (essentially funding 80% of salaries), is without doubt, stricter and less generous in the case of small company directors. Below I’ll discuss what can be claimed by this group of employees. The full guidance is the same as that for the non-director employees and is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Job Retention Scheme: How it applies to company directors

  • Directors can be furloughed if they’re an employee on PAYE and on the payroll on 28 February 2020
  • The same restrictions to furloughing apply both to directors and employees. See here for the full list but of particular difficulty for directors is the requirement to perform no work whilst furloughed.
  • In practice, a company may be so badly affected by the crisis that it goes into a ‘COVID-19 hibernation’ meaning that the director would have no day to day employment type duties (especially, income generating activity) but is still on hand to undertake their statutory duties as company director.
  • Other companies might only be partially affected. In such cases, it might be practical to furlough all but one of the directors. This may especially apply to small husband and wife ran companies.

How much is the grant worth to directors?

  • Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). In the case of directors it’s likely that the company will want to continue to pay 100% of the current salary in the knowledge that 80% will be funded by HMRC later.
  • Directors salaries are usually set quite low with the remainder of their remuneration being paid via dividends. Unfortunately HMRC will not be funding anything towards dividends.
  • Presuming therefore that you earn a typical directors salary (often below all tax and NI deductions) of £719 per month. HMRC will fund approx £575 per month.
  • The grant will be received by the company as taxable income and cannot be expected to hit the company before late-June 2020 or later.

Practical tips

  • There’s no need to worry or rush to take action. If work has ground to a halt you will qualify for this scheme. Just apply the rules are best as you can formalise the arrangement later using our template letter to furlough.
  • As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.

My previous COVID-19 posts remain relevant and are:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


Leave a comment

Budget 2018 – Small Business Guide & Tax Rates

2017.03 Hammond BudgetHere’s a brief round-up of the main points from the Budget 2018 for you as a small business owner:

Personal tax-free allowance – to increase to £12,500 for 2019/20 (from £11,850)

Marriage Allowance – increase to £1,250 worth a possible tax saving of £250 (from £237)

VAT Threshold – has been frozen at £85,000 for a further two years (until April 2022)

Tax free dividend allowance – to remain at £2,000.

Corporation tax – to remain at the current rate of 19%.

Making Tax Digital – No further announcement meaning that HMRC push ahead with the incoming requirement for VAT registered businesses to maintain digital records from April 2019 – most such business will need to consider using cloud accounting apps.

IR35 – Rules which have seen many public sector contractors become employees are expected to be rolled out to private sector large and medium-sized businesses from April 2020.

National Living Wage – will increase to £8.21 starting April 2019 (from £7.83)

So, at what rate should you set your next year’s director’s salary and dividends? Bespoke advice will be sent to all clients in the coming months. In the meantime we have two downloads available:

Our Guide to the Budget 2018, and our most recent Tax Rates Sheet

Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on
or click +Follow at the bottom of this page.


Leave a comment

Autumn Budget 2017 – Small Business Guide & Tax Rates

2017.03 Hammond Budget

An uneventful budget, thank you Phillip!
Here’s a brief round-up of the main points for you as a small business owner:

Personal tax free allowance – to increase to £11,850 for 2018/19 (from £11,500)

Marriage Allowance – increase to £1,185 worth a possible tax saving of £237 (from £230)

VAT Threshold – has been frozen at £85,000 for two years (there’s a hint that this could be lowered in line with other EU countries after April 2020)

Tax free dividend allowance – will be reduced to £2,000 (from £5,000) as we already knew from April 2018.

Corporation tax – to remain at the current rate of 19%.

Making Tax Digital – VAT registered businesses will be required to maintain digital records from April 2019 – meaning that most such business will need to consider using cloud accounting apps.

IR35 – Unsurprisingly, it was announced that HMRC will consult on reforms to IR35 for the private sector (public sector having already undergone reforms).

Self-Employed NI – Will delay the abolition of Class 2 NICs by a year until 6 April 2019. Class 4 will remain at 9%.

National Minimum Wage – increase to £7.83 starting April 2018 (from £7.50)

We have two downloads available for our clients:

Our Complete Guide to the Autumn Budget 2017, and our most recent Tax Rates Sheet covering 2016/17, 2017/18 and 2018/19

Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


Leave a comment

Spring Budget 2017 – A Business Owners Guide

2017.03 Hammond BudgetSmall business owners will probably find that yesterday’s budget was not as bad as some of the headlines are making out. Yes national insurance will increase for the self-employed and company shareholders will again see an increase in their personal tax bills but a quick look at the numbers shows that, for now, these increases are likely to be modest.

Mr Hammond suggested that the self-employed earning below £16,250 will actually end up paying less National Insurance – and this seems about right. In fact even if profits were around the £25,000 mark then the increase (which will start from April 2018) will be only around £140.

As for small company owners that pay themselves using a mix of salary and dividends (for the best 2017/18 salary and dividend mix see here) the announcement means a basic rate taxpayer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.

On The Bright Side

Very welcome was the postponement to Making Tax Digital for the self-employed which for those under the VAT threshold means that quarterly reporting will not now become mandatory until April 2018 (starting April 2020 for limited companies).

And any firm coming out of Small Business Rate Relief will receive an additional cap next year on increases of no more than £50 a month.

Download our more detailed guide to the budget (including current and newly announced tax rates and thresholds) here.

Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


2 Comments

Optimal Directors’ Salary and Dividend Mix for 2017-18

Probably the most important post of the year for limited company directors!

Question: What’s the most tax efficient salary and dividend mix for the 2017/18 tax year?

An owner managed limited company will usually pay their directors / shareholders with a mix of salary and dividends.

The level of the director’s salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for 2017/18 is:

Upper limits for 2017/18

Salary – per annum: £8,164 (last year £8,060)
Salary – per month: £680 (last year £671)

Dividend – per annum: £36,836 (last year £34,940)
Dividend – per month: £3,069 (last year £2,911)

It should be noted that since the introduction of the dividend ordinary tax rate of 7.5% on dividends over £5,000 there will be a personal tax bill of £2,138 (last year £2,025) if dividends are paid all the way up to the basic rate limit of £45,000 (last year £43,000).

For those companies that also have non-director employees on the payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,500 and dividends up to a maximum of £33,500 (the overall tax saving between the director and the company being around £234).

This second option will not be the best fit for everyone. More that ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.


Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


Leave a comment

Optimal Directors’ Salary for 2016-17

Probably the most important post of the year for limited company directors!

If you’re looking for the 2017/18 optimal directors’ salary, check out this year’s post here. Otherwise for our 2016/17 article read on.

An owner managed limited company will usually pay their directors’ / shareholders’ with a small salary + dividends.

The level of the director’s salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for 2016-17 is:

Upper limits for 2016-17

Salary – per annum: £8,040 (last year £8,040)
Salary – per month: £670 (last year £670)

Dividend – per annum: £34,960 (last year £30,891)
Dividend – per month: £2,913 (last year £2,574)

It should be noted that with the introduction of the dividend ordinary tax rate of 7.5% there will be a personal tax bill of £2,025 if dividends are paid all the way up to the maximum basic rate limit of £34,960 (yes, that’s a personal tax bill of up to £2,025 compared to £nil last year!).

For those companies that also have non-director employees on the payroll then they will continue to benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employers N.I.) by up to £3,000 (last year £2,000).

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £11,000 and slightly lower dividends of £32,000 (the overall tax saving between the director and the company being around £237 (last year £203)).

This second option will not be the best fit for everyone. This year, more that ever, personal circumstances must be carefully considered to give the best results.

Each client of Massey Accounting Company will be receiving a personalised recommendation shortly.


Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.


Leave a comment

Check out our new whiteboard animation

Please check out our newly created 2 min. whiteboard animation. Comments and feed-back are welcome! Please feel free to share.

 

Enjoy saving tax?

We have two videos to help on ourYouTube-logo-full_colorchannel; and for regular tax-tips follow our blog on Google+ or click +Follow at the bottom of this page.