Here we outline the suggested combination of salary and dividends from your limited company to make best use of the tax rates and allowances.
If you are looking at taking alternative combinations of salary and dividends, additional tax and NI will be due.
Tax will be payable on all dividends in excess of £2k so you should ensure you make sufficient provision to pay this additional tax by making regular payments to HMRC throughout the year.
Details of how to make payments with HMRC are listed here
This article concerns an announcement made in the Budget 2016 for which legislation will be introduced through the Finance Bill 2016.
Where loans are made to directors and unpaid nine months after the company year end, the tax charge is now 32.5% for all funds drawn.
Those who work in the public sector will be only too well aware of the additional scrutiny on the use of freelancers and how they operate their tax affairs.
Over the last year, we have received calls from clients who have been asked to provide assurances about their IR35 status and tax affairs.
Our advice has been:
- Ensure your contracts are reviewed for IR35 – we would suggest this is carried out by independent expert providers rather than using the HMRC helpline and,
- Assuming this review concludes they are operating outside of IR35 – then using a mixture of salary and dividends for extracting funds out of a limited company remains a robust and effective mechanism for achieving tax efficiency.
What happened in the Autumn Statement 2016?
How can I extract funds through a limited company in the most tax efficient way ?
In this article we address one of the most common questions we receive from business owners – how do I pay myself and make sure I minimise the amount of tax and national insurance ?
The options outlined below incorporate the significant changes to the way that dividends are taxed and the restricted availability of the employment allowance which were introduced from 2016-17.