What's the optimal directors’ salary and dividend mix for 2024/25?
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 £500 (reduced from £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 £3,255 (up from £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.
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.
Clients of ours will shortly receive our personalised recommendation.
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