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Tax-efficient salary and dividends in 2016-17

Director salary and dividend tax rates

The new thresholds and dividend taxation came into place on 6 April 2016.

 

Director salary in 2016-17

The £2,000 employment allowance is no longer be available to companies where the only person on the payroll is a director. The most tax-efficient salary for those companies will be a salary just below the NI threshold, as it was before the employment allowance was introduced. The difference with paying yourself a salary at the personal allowance level (£11,000) is small however, and if you do prefer to pay some NI, it is an option you might still consider.

Option 1: £8,060 salary, no NI contributions: £671 per month

Option 2: £11,000 salary, employee NI £352.80, employer NI £398.54, net monthly salary £887.30

 

Dividend tax

From April 2016, dividends will no longer include a tax credit. The new tax dividend tax bands will be:

0% below £5,000 (above the £11,000 personal allowance)

7.5% basic rate

32.5% higher rate

38.1% additional rate

 

 

August 20, 2016By Ingrid NIANGAccountancyLeave a comment
contractors taxdirector remunerationdirector salarydividend taxdividends
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About the author

Ingrid Niang est expert-comptable britannique avec seize ans d’expérience variée en Angleterre. De nationalité française, elle a créé son cabinet FRAccountants en 2009 et travaille tout particulièrement avec des entrepreneurs, chefs d’entreprise et consultants français ou francophones ayant une activité commerciale au Royaume-Uni. Elle leur apporte un suivi et conseil sur mesure leur assurant de se conformer aux exigences comptables et fiscales britanniques.

VAT flat rate changes: limited cost tradersDividend tax from April 2016

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