Directors remuneration
Discussion
I've been bashing the calculator this morning trying to work out the most tax efficient way of paying myself. Not as simple as one thinks.
I am sole Director of a Ltd company with 75% Shareholding. Other 25% shares are held by trust set up for 2 0ther family members. The trust was set up to benefit the 2 family member trustees in the event of my sale of the business. In order for me to receive back those dividends (25%) paid to the trust a/c, I have been named as a trustee. Obviously there is tax paid (40%?) on the dividend paid to the trust, the balance is then paid to me.
Anyone have any views of best ways to structure. I want to pay sufficient salary monthly to ensure adequate NI payments for pension. I also want to keep under the 40% tax bracket. Personal allowance std. £4895.
>>> Edited by Gucci on Thursday 31st March 14:19
I am sole Director of a Ltd company with 75% Shareholding. Other 25% shares are held by trust set up for 2 0ther family members. The trust was set up to benefit the 2 family member trustees in the event of my sale of the business. In order for me to receive back those dividends (25%) paid to the trust a/c, I have been named as a trustee. Obviously there is tax paid (40%?) on the dividend paid to the trust, the balance is then paid to me.
Anyone have any views of best ways to structure. I want to pay sufficient salary monthly to ensure adequate NI payments for pension. I also want to keep under the 40% tax bracket. Personal allowance std. £4895.
>>> Edited by Gucci on Thursday 31st March 14:19
Eric Mc!It all sounds a bit complicated.
Normally, an individual doesn't suffer any personal Income Tax on dividend income until their overall income (from all sources) in the tax year tips them into the 40% tax bracket. Even then. the Income Tax on the dividend will be calculated at 32.5% rather than 40%. However, don't forget that last year Gordon Brown introduced a special 19% CORPORATION TAX charge on dividend distributions - irrespective of the company's liability to Corporation Tax on its current year profits.
Really, your accountant should be advising you on this.
Normally, an individual doesn't suffer any personal Income Tax on dividend income until their overall income (from all sources) in the tax year tips them into the 40% tax bracket. Even then. the Income Tax on the dividend will be calculated at 32.5% rather than 40%. However, don't forget that last year Gordon Brown introduced a special 19% CORPORATION TAX charge on dividend distributions - irrespective of the company's liability to Corporation Tax on its current year profits.
Really, your accountant should be advising you on this.
It's pretty complicated - especially as you have to consider the scaling of Corp Tax. My accountant is ex-Revenue and every year works out the most Tax efficient way of paying myself.
The other thing that's worth bearing in mind, depending on the size of the company, is that your customers, employees, suppliers, etc.. can see your profits via Company House. You may want them to see reasonable profits or minimal profits, depending on the circumstances. Or, indeed, it may not be an issue.
The other thing that's worth bearing in mind, depending on the size of the company, is that your customers, employees, suppliers, etc.. can see your profits via Company House. You may want them to see reasonable profits or minimal profits, depending on the circumstances. Or, indeed, it may not be an issue.
Depends on how much profit your company makes. My business makes more than £300k (hitting the next band of corp tax) so therefore I take a larger salary and less dividend. I have some Excel spreadsheets that my accountant did with various salary / dividend scenarios that I can email you if you want (drop me a note via my profile) however I strongly recommend that you take independent tax advice.
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