Salary or Dividends

[GLAbusiness]

Background: Limited Company delivering personal services - outside IR35. Living in Scotland. Income from pensions circa £68,000. Age 75. Shareholder and director of the LTD. Currently not taking any salary. Assume already taken the £2,000 tax free dividend. Company has only 2 directors/shareholders. My wife takes a salary of £670 per month, so no NI involved.

So, I am trying to compare the effect of taking money from the company as dividends or salary. So, assume that profits of the LTD are greater than £30,000.

I have assumed that the optimum approach is to minimise the tax paid to HMRC. So, taking the £30,000 out of the company:

Option 1: Dividends. LTD Pays £5,700 in corporation tax at 19% I pay £9088 in income tax at 37.5% on the remainder. So, HMRC get £14,788.


Option 2: Take a salary: LTD does not pay CT on the £30,000. I pay £12,600 income tax at 41% So, HMRC get £12,600. Am I right to assume no NI?


On the face of it I should take the salary. Does this seem right or am I missing something obvious?

 

[Rawlinson Pryde]

Your Dividend tax rate looks a bit off! Higher rate taxpayers pay 33.75% this tax year. Also you are getting close to the £100k, so something to consider there.

Best to speak with your accountant.

 

[GLAbusiness]

Your Dividend tax rate looks a bit off! Higher rate taxpayers pay 33.75% this tax year. Also you are getting close to the £100k, so something to consider there.

Best to speak with your accountant.

Thanks. I think that means my figure for HMRC take should be more like 13,901

 

[Newchodge]

Thanks. I think that means my figure for HMRC take should be more like 13,901

As has been suggested, you are better off speaking to a professional than getting random advice from a group of strangers who do not have the relevant information available and may not have the faintest idea what they are talking about.

 

[nick34785]

Option 2: Take a salary: LTD does not pay CT on the £30,000. I pay £12,600 income tax at 41% So, HMRC get £12,600. Am I right to assume no NI?

Just curious, why no NI?

 

[Scalloway]

The OP is 75. You don't pay NI once you pass State Pension age.

 

[UK Contractor Accountant]

But you do still pay Ers Ni (secondary Contributions) subject to Employment Allowance Claim if qualify.