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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.


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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.


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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.