Tax Efficient Salary And Dividend – Tax Year 17/18

For the 2017/18 Tax Year (6th April 2017 to 5th April 2018), you have 2 options as follows:

Option 1 is for Companies with just the Director as an Employee

Option 2 is for Companies with an Additional Employee

Option One – Annual salary to NI threshold

Gross salary £8,164 equal to £680.33 per month (No NI or Tax to Pay – Note with this salary you still maintain your entitlement to future state benefits and pension without necessarily paying any National Insurance)

Dividends £8,336 (£5,000 plus balance of personal allowance tax free)
+
Dividends £28,500 (taxed at 7.5%)

Total gross income £45,000

Less tax on £28,500 of dividends at 7.5% = £2,138 (payable via self assessment)

What you are left with is £42,862

Company gets 19% tax relief on £8,336 salary = £1,584

Overall net remuneration and tax saved by the company is £44,446

 

Option Two – Salary to Tax Threshold – Director Plus 1 Employee

Gross salary per Employee £11,500 equal to £958.33 per month (No PAYE Tax To Pay)

Dividends £5,000 (tax free)
+
Dividends £28,500 (taxed at 7.5%)

Total gross income £45,000

Less tax on £28,500 of dividends at 7.5% = £2,138 (payable via self assessment)

less Employees NI at 12% on £3,164 = £380

What you are left with £42,482

Company gets 19% tax relief on £11,500 salary = £2,185

Overall net remuneration and tax saved by the company is £44,667

 

Gain from Option 1 per employee = £221

 

 

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