Hi there,
If you are a UK company director and shareholder and you want to know how to best pay yourself for 2024/25 then you are in the right place. Most accountants keep this tax planning behind closed doors for their clients but our view is that it's such common tax planning that we should make it public.
Now as long as you don't have any other income outside of your company such as rental income, pensions, salaries, etc then this guide does apply to you. If you are a single director of a company with no other staff then you will need to reduce your salary and compensate for it by increasing your dividends by the same amount.
If you own several companies then the total incomes shown are NOT per company but per individual.
We have three levels we recommend depending on your personal needs - pay no tax, just pay basic rate tax, pay higher rate tax but keep your personal allowance.
All our recommendations are for a salary and dividend split. To be able to pay dividends you have to have sufficient reserves in your company, you can find this figure on your balance sheet.
The first level we look at is paying yourself so you do not have to pay any personal tax. Do take into account though that this will limit your personal income to around £13,000.
*The monthly tax amount is for you to put aside from the total pay indicated.
The second level is the most common level. You get to receive a total withdrawal of around £4,000 per month with only having to put around £300 a month aside for tax. This is a very efficient payment method.
*The monthly tax amount is for you to put aside from the total pay indicated.
The third level is the level where you increase your earnings further still, expose yourself to some more tax but keep it sensible by retaining your personal allowance. You get to receive a total withdrawal of around £8,000 per month but for doing so you need to put aside over £1,600 of that for taxes.
*The monthly tax amount is for you to put aside from the total pay indicated.
It is possible to pay yourself even more tax however there are some tax consequences. The first is that over £100k of earnings you start to lose your tax-free personal allowance which hits your overall tax rate and on top of that dividend income above around £125k goes up to over 39%.
If you want specific tax advice for your situation and you are a client then please contact your client manager. If you aren't a client and you would like this level of tax advice for you and your business then why not book a discovery call to find out more.
