The amount of money you can withdraw from your company increases due to budget changes.
This is the annual update for the amounts to withdraw from your company for the tax year starting on 6 April 2014.
For the 2013-14 tax year we advised a director / shareholder to take the following ‘optimum’ monthly amounts out of their personal company:
• Salary £641 a month or £7,692 a year
• Dividend £2,532 a month or £30,384 a year
This assumes, of course, that you are making sufficient profits to pay dividends of this amount.
This gives a total amount of £38,076 and you will pay no personal tax assuming you have no other income.
If a company is owned with your spouse, these amounts can be doubled.
The company saves Corporation Tax of £1,538 by paying a salary of £7,692.
Revised amounts from 6 April 2014
The tax rates change from 6 April 2014 and our advice updates the amounts you can withdraw to avoid a personal tax bill while also withdrawing funds in the most tax efficient way from your company.
The numbers are more complicated this year because the personal allowance increases to £10,000 from 6 April 2014 and there is a new measure introduced that reduces a company employers national insurance bill by up to £2,000 a year.
We do not know how the second measure will apply but it makes sense to take advantage of this while we can.
This means it makes sense to pay a higher PAYE salary from 6 April 2014 to take advantage of these changes. It also has the benefit of saving Corporation Tax too.
The revised monthly amounts are:
• Salary £833.33 a month or £9,999.96 a year
• Dividend £2,389.88 a month or £28,678.56 a year
There will be employee’s national insurance to pay on the salary of £245.28.
This will give net income after national insurance of £38,433. You will have no personal tax to pay assuming you have no other sources of income.
Again if a company is owned with your spouse, these amounts can be doubled.
This is an increase of £357 per person over the 2013-14 figures.
This will also mean that your company will now save Corporation Tax of £2,000 on the salary paid; this is a saving of over £400 compared with the previous year.
You can of course take more from your company but extra dividends will give you a higher tax bill, you may also pay extra tax if your household is in receipt of child benefit.
Please contact us if you would like us to prepare a calculation for you based on your individual circumstances.