Rates from April 2022
There are many factors to consider in determining the most tax efficient methods of extracting funds from your company, whilst complying with all the tax rules and regulations.
Paying a salary will incur employees’ national insurance and employers’ national insurance unless covered by the Employment Allowance. However, these expenses are tax deductible whereas dividends are paid out of after-tax profits.
There is no “one size fits all” remuneration level, and individual circumstances need to be considered.
It is essential to seek professional and timely advice, and not “after the horse has bolted” so to speak, and it can be costly and time consuming to rectify errors. Such errors can include:-
• just drawing money out and creating an “overdrawn” director’s loan account
• voting dividends with the aim of showing sufficient income to obtain a mortgage but retained losses inside the company. A company needs to have profits before paying dividends.
• Paying a “salary” without putting it through the payroll.
• Paying interest to the directors without accounting for the income tax that should have been deducted.
• ……and others…….
