Massey Accounting Company

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Tax Free Pay Rise

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Next time you’re considering giving your employees a pay rise (or yourself as director or secretary) consider giving them a mobile phone instead!

Presuming the employer takes out the contract in the company name and provides just one phone to their employees then this is a tax free benefit to the employee – regardless of how many personal calls the employee makes.

Example

An employee currently pays a £40 per month mobile contract. After having paid his tax (20%) and National Insurance (12%) this contract costs the employee £59 of their monthly gross wage!

Presuming the employer could secure a similar tariff in their name the cost to the employer might be just £27 per month (after VAT and corporation tax relief).


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Optimal Director’s Salary / Dividend Remuneration for 2014-15

Small company owners may be in for a better than average pay rise this year!

Wage riseAs usual the small owner managed limited company will want to remunerate 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 would be:

Upper limits for 2014-15

Salary – per annum: £7,956 (last year £7,692)
Salary – per month: £663 (last year £641)

Dividend – per annum: £30,518 (last year £30,378)
Dividend – per month: £2,543 (last year £2,531)

However, with the introduction of Employment Allowance some company directors will be better off paying themselves a £10,000 salary and slightly lower dividends (up to £28,678).

Employment Allowance means that most employers will be able to reduce their Class 1 National Insurance contributions (Employers NI) by up to £2,000.

So, increasing your salary and yet not having to pay the Employers NI will save the company £163 per director / shareholder.

Not everyone will benefit. Generally if you have other income you’d be better sticking with the above “usual” remuneration package.

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

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