Salary versus Dividends
How to Extract Company Profits and Cut Your Tax Bill By Thousands
This unique tax guide explains how you can extract funds from your company in the most tax efficient way, by choosing the optimal mix of bonus, salary and dividends. It's essential reading for everyone who runs a limited company.
Tax Tip
The salary versus dividends question has been drastically altered by tax changes announced in recent Budgets. Thousands of company directors will find that a change of strategy is required if they want to pay less tax.
This guide tells you exactly what to do. Clear conclusions and easy to follow tables show you the best pay structure in almost every situation.
"After recently purchasing Salary vs Dividends just wanted to say how useful it has been in deciding on our company pay structure for the year. The Director shareholders stand to save £10k each. Thanks.
I also purchased 'Using a Property Company to Save Tax' and after weighing everything up I recently formed a Property Investment Company with a clear understanding of the financial implications. Again, thanks for these great publications."
What Information is Contained in the Guide?
Salary versus Dividends is written in plain English and contains many practical examples.
Subjects covered include:
- Clear explanation of the corporation tax changes announced in the March 2008 and earlier Budgets.
- How to choose the best mix of salary and dividends for YOU.
- When dividends will save you more tax.
- When more salary is the best strategy.
- Exactly how much in tax-free dividends you can take this year.
- The cash flow benefits of dividends, why they are under threat and how you can safeguard them.
- The even greater cash flow benefits of twice annual dividends.
- How to get early corporation tax relief for bonus payments – even before PAYE is due!
- How to avoid national insurance – the politicians’ favourite tax on work.
- How to ‘pay’ salaries or dividends without taking cash out of your company and why this could ultimately save you tens of thousands of pounds.
- Why paying interest on a loan account is often better than salary or dividends.
- A clever tax saving technique using a company car instead of a bonus.
- More changes coming in 2008 – how they will affect you and whether you should delay paying yourself.
- Why your company’s accounting date affects your optimal pay structure.
- How changing your pay date can give you a vital cash flow advantage.
- Using your spouse or partner to help achieve further tax savings.
- How to deal with minority shareholders and still make sure your pay is tax efficient.
- The best strategy for family companies owned by brothers and sisters or other relatives.
- How to structure your pay when you pass the state retirement age.
- How to structure your pay when you’re claiming tax credits.
- How to pay yourself an extra £25,000 and still claim tax credits as if you hadn’t.
- What to do if your company is making a loss.
- How making pension contributions affects your optimum pay decision.
- Sample documentation to help you keep the taxman happy.
- The third way: the long-term benefits of maximising capital growth through reinvesting profits – keep your maximum tax rate to just 10%.
- Dangers to watch out for – personal service companies and ‘husband and wife’ companies: what does ‘Arctic Systems’ mean for you?
The most interesting information in the guide comes from a selection of tables constructed using a program we developed at Taxcafe. These tables will help you construct the optimal pay package. They take account of ALL the taxes affecting you and the business: income tax, corporation tax, national insurance paid by you and national insurance paid by the company.
Click here for a complete list of the guide's contents
About the Author
The author is Carl Bayley BSc ACA, one of the country's most respected property tax experts. Carl is Taxcafe's Editor and author of some of our most popular tax guides. A regular speaker on tax matters, he was recently invited to talk to over 450 people at the latest Property Investor Show. Carl is also a regular contributor to TV programmes such as the BBC's It's Your Money programme and national newspaper articles on tax matters. He is a member of the governing council of the Institute of Chartered Accountants in England and Wales.
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