For the 2011-12 tax year we advised a director/shareholder to take the following ‘optimum’ monthly amounts out of their personal company:
- Salary: £589 a month
- Dividend: £2,625 a month or £31,500 a year
This assumes, of course, that you are making sufficient profits to pay dividends of this amount.
This gives a total amount of £38,568 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 £1,413 by paying a salary of £7,068.
New rates from 6 April 2012 onwards
The tax rates changed on 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: £624 a month
- Dividend: £2,624 a month or £31,488 a year
The increase in the personal allowance means that we can increase the salary paid.
This will mean that your company will now save Corporation Tax of £1,497 on the salary.
This gives a total amount of £38,976 from 6 April 2012 and you will pay no personal tax, assuming you have no other income.
You can of course take more from your company but each additional £1,000 of dividend taken will cost you £250 in personal tax up to the first £59,000 of net dividend. It becomes more complicated once your gross income exceeds £100,000 in a tax year because you start to lose your personal allowances.
Working from Home Allowance increased
The tax-free working from home allowance is increased to £4 per week (from £3 a week in 2011-12). This amount can be paid in addition to the above amounts.