Massey Accounting Company

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Optimal Director’s Salary for 2015-16

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

Wage riseThe small 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 would be:

Upper limits for 2015-16

Salary – per annum: £8,060 (last year £7,956)
Salary – per month: £671 (last year £663)

Dividend – per annum: £30,891 (last year £30,518)
Dividend – per month: £2,574 (last year £2,543)

However, since the introduction of Employment Allowance some company directors will be better off paying themselves a £10,600 salary and slightly lower dividends (up to £28,606).

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 £203 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 recommendation shortly.

Enjoy saving tax?

View our video: How to Save Tax YouTube-logo-full_color; and follow our blog on Google+ or click +Follow at the bottom of this page.


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Payroll clients beware!

Starting 6 March 2015 HMRC will issue penalties for late payroll submissions.

This means that payroll data needs processing and submitting to HMRC on or before the date your employees are paid.

Penalties are charged for more than one late submission in the tax year as follows: 1-9 Employees – £100 per month; 10-49 Employees – £200 per month.

Whist this is strict I don’t think we’ve had one late filing this year. However, the real trap may be when it comes to leavers:

Leavers (and their P45) should be processed and notified to HMRC on or before the day they leave or on the day of their last payment. Failure to report on time will trigger a late filing penalty.

Please keep this in mind and keep us informed as soon as you know when an employee is starting and leaving.

Source material: https://www.gov.uk/what-happens-if-you-dont-report-payroll-information-on-time

Enjoy saving tax?

View our video: How to Save Tax YouTube-logo-full_color; and follow our blog on Google+ or click +Follow at the bottom of this page.