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In the good old days there was an easy way to work out the optimum pattern of salary and dividends for directors of small UK companies. With the advent of the Finance Bill 2016 the situation has become hopelessly complex and that prompted AccountingWeb to publish a critical blogpost. Here’s the first bit with the all important table:

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And, as we said in our 30 Nov 2015 blogpost, …

This article has moved here.

There is an established working practice whereby directors of small limited companies (typically “one man” limited companies) reward themselves with a combination of small salary and big dividend. The point of doing this is to stay within the law, and to hand over the smallest possible sum of money to HM Revenue & Customs. In order to benefit from this working practice you must follow the system precisely. Failure to do so may lead to the imposition of a deduction of PAYE from your income and possibly a charge to …

The question has been around for over 20 years

The established way for a small limited company to reward its director/shareholder is to take a small salary at the tax and NI threshold and to top that up with dividends. Of course that assumes the company has enough profit and can pay dividends. Dividends are paid out of the post-tax profit and all things being equal, a basic rate taxpayer will have no additional personal tax to pay.
It has long been argued (for more than 20 years now) that the Revenue …

There is an established working practice whereby directors of small limited companies (typically “one man” limited companies) reward themselves with a combination of small salary and big dividend. The point of doing this is to stay within the law, and to hand over the smallest possible sum of money to HM Revenue & Customs. In order to benefit from this working practice you must follow the system precisely. Failure to do so may lead to the imposition of a deduction of PAYE from your income and possibly a charge to …