Ever wondered if your pay structure is as tax efficient as it could be?
Small salary and the rest as dividendsThis strategy is generally quite well known and implemented by many – but is it working as well as it could do for you? The most tax efficient salary level for most directors in 2021-22 is £9,568 per annum, but we see many cases where more than this is paid and many more who fixed a salary at the most tax efficient level several years ago and have left it at about £7-8k.
Company carsMany directors take a small salary as above, but then have a company car and other benefits which can drastically reduce any tax efficiencies. A company car could be a tax advantage if an electric or ultra-low emissions vehicle, but an expensive or high emission car can cost a lot in tax, particularly if the company also provides private fuel.
Keep your accountant informedIf you plan to change your pay structure, change your company car/get one for the first time, or expect to receive a new income from another source, then do make sure you run your plans past your accountant.
Decisions like this without professional advice can cost a lot in tax, particularly if extra income/benefits put you into a higher rate tax bracket or mean that you lose your Personal Allowance. If you claim Child Benefit, extra unplanned income could mean incurring the High Income Child Benefit Charge.
Here to help
If you are uncertain as to how tax efficient your remuneration is, why not run it past us? We can help, whether it is by small alterations to maximise the existing situation or a corporate restructure where this would give scope for more substantial savings.