What's the optimum directors’ salary and dividend mix for 2023/24?
Small companies usually pay their directors a mix of salary and dividends; traditionally set to avoid income tax and national insurance. On this basis, the recommended remuneration package for the forthcoming tax year is:
Dividends exceeding the Dividend Allowance of £1,000 will be taxed via the directors’ Self-Assessment Tax Return at 8.75%. If dividends are paid up to the Basic Rate tax threshold of £50,270, there will be a personal tax bill of £3,211.
Companies with more than one director on the payroll may benefit from the Employment Allowance, which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £5,000.
In such cases, a higher than usual directors' salary - up to the Personal Allowance - can produce overall tax savings of £601 (last year £514).
This higher, non-traditional directors' salary is not the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.
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