I published these details on my blog in December, but I thought it would be a good idea to republish them as we will soon be in the 2013/14 tax year.
For the 2012-13 tax year, we advised a director/shareholder to take the following ‘optimum’ monthly amounts out of their personal company:
- Salary: £624 a month or £7,488 a year
- Dividend: £2,624 a month or £31,488 a year
This assumes, of course, that you are making sufficient profits to pay dividends of this amount.
This gives a total amount of £38,976 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 £1,497 by paying a salary of £7,488.
The tax rates change from 6 April 2013 and our advice will also change on the amounts you can withdraw to avoid a personal tax bill.
The revised monthly amounts are:
- Salary: £641 a month or £7,692 a year
- Dividend: £2,532 a month or £30,384 a year
The increase in the National Insurance threshold means that we can increase the salary paid.
This will mean that your company will save Corporation Tax of £1,538 on the salary.
This gives a total amount of £38,076 from 6 April 2013 and you will pay no personal tax, assuming you have no other income. This is a reduction on the income paid in 2012-13, because the 40% tax threshold has not been increased.
If you want to keep the amounts paid to you the same as last year, you will have an annual tax bill of £225 to pay.
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 receives Child Benefit.
The tax-free working from home allowance of £4 per week can be paid in addition to the above amounts.