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Taking money out of your company 2011-12

At present in the 2010-11 tax year we tend to advise someone to take the following ‘optimum’ monthly amounts out of their personal company:

  • Salary £476 a month
  • Dividend £2,805 a month

This assumes, of course, that you are making sufficient profits to pay dividends of this amount.

This gives a total amount of £39,372 and means that assuming you have no other income, no personal tax is payable.

If a company is owned with your spouse, these amounts are doubled.

The company saves Corporation Tax of just under £1,200 by paying a salary of £5,712.

The tax rates change from 6 April and our advice will also change on the amounts you can withdraw to avoid a personal tax bill.

The revised monthly amounts are:

  • Salary £589 a month
  • Dividend £2,625 a month

The increase in the personal allowance means that we can increase the salary paid.

This will mean that your company will now save a Corporation Tax of £1,414 on the salary, saving the company an extra £214 in tax.

The reduction in the basic rate band means that we have to reduce the amount of maximum dividend that can be paid, assuming no other income or pension contributions, to £31,500.

This gives a total amount of £38,568 from 6 April 2012. This is a reduction in income of £804.

You may want to continue to take the same total amount out of your company as you do now of £39,372.  If this is the case, the split between dividends and salary would be:

  • Salary £589 a month
  • Dividend £2,692 a month

This would give you a small personal tax bill of only £110.

I personally would keep my personal income the same on the basis that, although I lose £110 personal tax on the swings, I save £214 in Corporation Tax on the roundabouts.

The choice is yours.

Note: The amounts may change on Budget Day on 23rd March but as things stand they can be accessed at 

Income Tax Rates   and     NI Contributions

4 Responses to “Taking money out of your company 2011-12”

  1. Andy Hunt says:

    What are the tax rate changes this year ?

  2. Andy Hunt says:

    Is there a list of changes published by the HMRC

  3. Andy Woodason says:

    Hi Andy, I guess I can see why I had a bit of a personal tax bill this time around. The above advice will be useful for next time. Basically what your saying is we’re all worse off! Work harder earn less! You’ve got to love the goverment they know how to look after the small businessman.

    Is there any good news?

    Best wishes
    Andy

  4. Andrew Scott says:

    Hi Andy

    You are correct that anyone who pays tax at the 40% rate is worse off from 6 April 2011.

    The government would possibly argue that they need to ‘spread the pain around’.

    I think this may be the first of several increases in tax. Maybe to get a better deal we all need to write to our MP’s.

    Regards

    Andy

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