how much do we atually save by paying dividends?

[UKSBD]

Based on a wage of £5,400 and dividend of £30,000 how much does
that actually save us in tax?

I assume the the corporation tax balances out PAYE, so we effectively
save on both NICS contributions (21%?)

Am I right in thinking that saves us approx £6,000 a year or are there
other things to consider?

[David Griffiths]

Based on a wage of £5,400 and dividend of £30,000 how much does
that actually save us in tax?

I assume the the corporation tax balances out PAYE, so we effectively
save on both NICS contributions (21%?)

Am I right in thinking that saves us approx £6,000 a year or are there
other things to consider?

In very round terms you lose 1% tax on the £30k, but you gain 23.8% NI, so a net saving of 22.8% = £6,800.

Plus the cash flow advantage that the CT is payable 9 months after the year end, but the PAYE is payable monthly

Less the pyschological disdvantage that by the time that you have to pay the extra £6,800 corporation tax you have totally forgotten about the monthly savings in PAYE, so you resent paying the CT, and of course it's your accountant's fault! :D

[UKSBD]

Does that mean in theory it is better to pay yourself the whole dividend
in first week of tax year? and are there any advantages/disadvantages
of paying 2 big dividends in the companies tax year?

[Bumbling Amateur]

Based on a wage of £5,400 and dividend of £30,000 how much does
that actually save us in tax?

I assume the the corporation tax balances out PAYE, so we effectively
save on both NICS contributions (21%?)

Am I right in thinking that saves us approx £6,000 a year or are there
other things to consider?

In this case [according to my hastily erected spreadsheet] you will pay a total of 20% in taxes. Alternatively if you pay the whole lot in wages you pay 39%. A saving of nearly £7k. This compares with a total tax bill of 24% if you are self-employed.

[David Griffiths]

Does that mean in theory it is better to pay yourself the whole dividend
in first week of tax year? and are there any advantages/disadvantages
of paying 2 big dividends in the companies tax year?

Tax is calculated over the whole year and there's no difference to the overall liability because of when the income comes in. That's also true of NI payments for directors, but there may be ups and downs in PAYE if you take heavier salaries early, unless you claim that you only pay once a year. To be honest, do many companies have enough to pay a whole year at once?

[Lexpay]

I have to agree that paying yourself a dividend rather than taking all your pay through PAYE makes considerable savings, I am finance director in a healthcare business as well my payroll business and was advised, by my accountant to pay a minimal amount through payroll for myself and the other directors, but enough to be above minimum wage. I estimate we have saved over 15k in 2 years, we tend to run our payroll weekly for this purpose because it fits with our other staff, you would be better paying yourself monthly perhaps to look realistic!