Given current tax rates, paying a dividend rather than a salary will often be a more cost-effective way of withdrawing profits from a company. Tax is currently payable on any dividend income received over the £2,000 annual dividend allowance at the following rates: 7.5% on dividend income within the basic rate band (up to £37,500…
New tax rates and allowances came into effect from 6 April 2019 which have affected the optimal salary calculation
Family companies – optimal salary for 2019/20 For personal and family companies it can be beneficial to extract some profits in the form of a salary. Where the individual does not have the 35 qualifying years necessary to qualify for the full single-tier state pension, paying a salary which is equal to or above the…
Employing family members It is permissible for a business to claim a tax deduction for the cost of a reasonable wage paid to a family member who helps in the business. Their duties could, for example, include answering the phone, going to the bank, bookkeeping and other administrative tasks. The tax legislation specifies that ‘in…
More than 25 million working days are lost annually due to work-related ill health matters, including the two leading causes of workplace absence, namely back injuries and stress, depression or anxiety. There are however, several areas where employers can use tax breaks and exemptions to help promote health and fitness at work. Gym facilities and…
Do you earn over £100k? Read our latest blog to see if you can keep your entitlement to the personal allowance
Abatement of the personal allowance Not all taxpayers are able to benefit from the personal allowance – once income exceeds £100,000 the allowance is gradually reduced until it is eliminated in full. However, there are steps which can be taken to reduce income and preserve entitlement to the personal allowance. The personal allowance is set…
A popular profits extraction strategy for personal and family companies is to extract a small salary, taking further profits as dividends. Where this strategy is pursued for 2019/20, what level should be the salary be set at to ensure the strategy remain tax efficient? Salary As well as being tax effective, taking a small salary…
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