TAX EFFICIENT EXTRACTION OF PROFIT FROM COMPANIES FOR 2018/19
For many years accountants and tax advisors have suggested that director/shareholders should extract profit by paying themselves a low salary with the remainder of their income being extracted in the form of dividends.
The starting point of NICs will rise to £162 a week from 6 April 2018. This is now significantly lower than the £11,850 personal income tax allowance.
We are suggesting paying an annual salary of £11,850, as the additional salary would save corporation tax at 19% of £651, whereas the employees NIC would be £411.
As far as the level of dividends is concerned, the rate of tax changes from 7.5% to 32.5% at £46,350, so ideally the dividends should not exceed £34,500 if a salary of £11,850 is paid. The first £2,000 would be taxed at 0% with £32,500 being taxed at 7.5%. Don’t forget that this tax will then be due on 31 January 2020.
Contact us to discuss other ways in which you can extract profits from your family company tax efficiently.