Getting the best combinations for salary and dividends in 2019/20 can enable you to efficiently take your money out of your company as a director.
The scenarios below are generic and this article is for general information only. To get a more tailored calculation and information about the best combinations for salary and dividends in 2019/20 for your company get in touch with us.
The personal allowance for 2019/2020 has increased to £12,500 from 2018/19’s allowance of £11,850. The basic rate threshold has also increased to £50,000 (compared to 2018/19’s £46,350).
The dividend allowance remains at £2,000 before it’s taxed.
Further details regarding dividend, salary, tax free allowance and NI can be found on the HMRC Gov website.
Most single director companies use a strategy of taking a low salary and a higher dividend amount because this is the most tax effective combination for their salary and dividends in 2019/20.
Take home pay £47,337 (£50,000 less £2,663).
As a multiple director / employee company you are generally eligible to claim employment allowance, however this approach also won’t be effective if the employment allowance has already been utilised against the NI due on the salaries paid to your company’s other employees.
If you are eligible to claim the employment allowance, your strategy should be:
With this strategy, there will be £3,127 (£2,663 + £464) basic rate tax and Employee’s national insurance to pay.
Take home income: £46,873 (£50,000 less £2,663 and £464).