Optimising Your Salary and Dividend Mix

It is important that shareholders/directors have regular reviews of their salary and dividend mix to ensure they are receiving the greatest benefit. There are several key factors to note covering NIC, Income Tax and Dividends:

National Insurance Contributions:

Dividends and Income Tax:

Companies Act

The Companies Act requires that companies may only pay dividends out of distributable profits. This means that in the absence of brought forward reserves the company would need to:

Overall the combination of salary and dividends suggested above would result in net of tax take home cash of £93,746 for the couple out of profits before salaries and corporation tax of £117,593 (20.3% overall tax). This still compares very favourably with the amount of tax and NIC payable if the couple were trading as a partnership.

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