{"id":1243,"date":"2010-08-15T08:23:44","date_gmt":"2010-08-15T08:23:44","guid":{"rendered":"https:\/\/financial-fluency.co.uk\/wordpress\/"},"modified":"2019-04-02T17:49:40","modified_gmt":"2019-04-02T16:49:40","slug":"business-tax-salary-versus-dividends","status":"publish","type":"page","link":"https:\/\/www.financial-fluency.co.uk\/financial-fluency-publications\/tax-publications\/business-tax-salary-versus-dividends\/","title":{"rendered":"Business Tax: Salary versus Dividends"},"content":{"rendered":"

Salary versus Dividends<\/h1>\n

by By Carl Bayley BSc ACA<\/p>\n

\"buy<\/a><\/p>\n

\"salary<\/p>\n

 <\/p>\n\n\n\n
“After recently purchasing Salary vs Dividends just wanted to say how useful it has been in deciding on our company pay structure. The Director shareholders stand to save \u00a310k each. Thanks. I also purchased Using a Property Company to Save Tax and after weighing everything up I recently formed a Property Investment Company with a clear understanding of the financial implications. Again, thanks for these great publications.”<\/em>
\nKeith Armstrong, Derbyshire<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n
“You could save almost \u00a316,000 in corporation tax by timing your income carefully”<\/em>
\nTax Busting Tip<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n
“You could save up to \u00a311,364 by taking a director’s loan instead of a bonus or dividend”<\/em>
\nTax Busting Tip<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n
“You could save an extra \u00a3800,000 in capital gains tax through careful planning”<\/em>
\nTax Busting Tip<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Contents of Salary versus Dividends<\/h2>\n

Chapter 1 Introduction\u00a0<\/strong>
\n1.1 Why is the Salary\/Dividend Question So Important?
\n1.2 Which Companies are Affected?
\n1.3 Marginal Rates and the Inevitable Trade-Off
\n1.4 What\u2019s the Difference?
\n1.5 Salary or Bonus?
\n1.6 Scope of this Guide
\n1.7 About the Examples
\n1.8 A Quick Answer
\n1.9 A Second Role<\/p>\n

Chapter 2 How are Companies & Directors Taxed?\u00a0<\/strong>
\n2.1 Corporation Tax Relief
\n2.2 Corporation Tax Rate Changes
\n2.3 Effective Corporation Tax Rates
\n2.4 Marginal Tax Rates for Directors
\n2.5 Tax Years
\n2.6 Tax Payable on Salaries and Bonuses
\n2.7 Tax Payable on Dividends
\n2.8 Dividend Tax Credits
\n2.9 Maximum Tax Free Payments
\n2.10 Employer\u2019s National Insurance Contributions
\n2.11 What do Salaries and Bonuses Cost?
\n2.12 What do Dividends Cost?
\n2.13 Cashflow Considerations
\n2.14 Cashflow Impact of Salaries and Bonuses
\n2.15 Cashflow Impact of Dividends
\n2.16 Dividends and PAYE
\n2.17 Salary and Bonus Payments to Non-Directors
\n2.18 Directors with Other Income
\n2.19 The Impact of Other Income on Dividends
\n2.20 Other Factors Affecting Tax on a Salary or Dividend<\/p>\n

Chapter 3 The Computer Model\u00a0<\/strong>
\n3.1 Introduction to the Model
\n3.2 Model Results 2010\/2011
\n3.3 Interpreting the Model
\n3.4 Bonus Cost Increases
\n3.5 Model Conclusions
\n3.6 Overview of Model Recommendations<\/p>\n

Chapter 4 Planning Dividend or Bonus Payments\u00a0<\/strong>
\n4.1 Planning for Profit
\n4.2 Using This Chapter
\n4.3 Small Companies: Profits Not Exceeding \u00a3300,000
\n4.4 Medium-Sized and Large Companies: Profits Exceeding \u00a3300,000
\n4.5 Escape
\n4.6 Planning a Payment
\n4.7 Planning a Complex Payment
\n4.8 The Cost to the Company
\n4.9 Dividends Taking Directors\u2019 Taxable Income Over \u00a3100,000
\n4.10 Large Payments to Directors of Small Companies
\n4.11 Large Payments to Directors of Medium-Sized or Large Companies
\n4.12 Summary<\/p>\n

Chapter 5 Bottom-Up Planning\u00a0<\/strong>
\n5.1 A Clean Sheet 92
\n5.2 Maximum \u2018Tax-Free\u2019 Payments
\n5.3 Retaining the Director\u2019s Personal Allowance
\n5.4 Small Companies: Profits Not Exceeding \u00a3300,000
\n5.5 Medium and Large Companies: Profits Exceeding \u00a3306,572
\n5.6 Medium-Sized Companies: Profits between \u00a3300,001 and \u00a3305,714
\n5.7 Medium-Sized Companies: Profits between \u00a3305,715 and \u00a3306,572
\n5.8 The Bigger Picture<\/p>\n

Chapter 6 Timing Your Payments\u00a0<\/strong>
\n6.1 Accelerating Corporation Tax Relief
\n6.2 Timing Dividend Payments
\n6.3 Maximising Corporation Tax Relief
\n6.4 Spreading the Cost
\n6.5 Delaying Payments
\n6.6 A Glimpse into the Future
\n6.7 Forecast Model Results 2011\/2012
\n6.8 Overview of Model Recommendations for Payments Made in 2011\/2012
\n6.9 Accelerating Payments<\/p>\n

Chapter 7 Using Loan Accounts\u00a0<\/strong>
\n7.1 Exploiting Tax Advantages
\n7.2 Lend to Save
\n7.3 Medium-Term Benefits
\n7.4 Long-Term Benefits
\n7.5 Very Long Term
\n7.6 Interest on Loan Accounts
\n7.7 An Interesting Strategy
\n7.8 Compound Interest
\n7.9 Loan Account Limitations
\n7.10 Accruing Interest<\/p>\n

Chapter 8 Loans to Directors\u00a0<\/strong>
\n8.1 Legalised!
\n8.2 The Section 419 Charge
\n8.3 The Benefit in Kind Charge
\n8.4 Saving Tax with Loans to Directors
\n8.5 Deferring Tax with Loans to Directors
\n8.6 Longer-Term Loans
\n8.7 Loans versus Dividends for High Earners
\n8.8 Loan Waivers
\n8.9 Loans versus Bonuses<\/p>\n

Chapter 9 Multiple Owners\u00a0<\/strong>
\n9.1 Background
\n9.2 Corporate Couples
\n9.3 Unequal Couples
\n9.4 Bottom-Up Planning for Couples
\n9.5 Other Co-Owners
\n9.6 Family Companies
\n9.7 Minority Shareholders
\n9.8 Company Budgets
\n9.9 The Composite Rate Approach<\/p>\n

Chapter 10 Companies With Different Tax Rates\u00a0<\/strong>
\n10.1 Associated Companies
\n10.2 What is an Associated Company?
\n10.3 Short Accounting Periods
\n10.4 Long Accounting Periods
\n10.5 The Corporation Tax Threshold Formula
\n10.6 Loss-Making Companies
\n10.7 Close Investment Holding Companies<\/p>\n

Chapter 11 Older Directors\u00a0<\/strong>
\n11.1 Privileges of Age
\n11.2 Age-Related Allowances
\n11.3 Withdrawal of Allowances
\n11.4 National Insurance for Older Directors
\n11.5 Marginal Tax Rates on Salaries and Bonuses for Older Directors
\n11.6 Directors Aged 65 or Over
\n11.7 Female Directors Aged 60 to 64
\n11.8 When I\u2019m 64
\n11.9 Younger Directors with Older Spouses
\n11.10 Older Directors with Savings Income
\n11.11 Older Directors with Other Dividend Income
\n11.12 Marginal Rates on Dividends for Older Directors
\n11.13 The Computer Model for Older Directors 2010\/2011
\n11.14 Planning Payments to Older Directors
\n11.15 Pensions<\/p>\n

Chapter 12 Directors with Children\u00a0<\/strong>
\n12.1 The Impact of Tax Credits
\n12.2 Working Tax Credits
\n12.3 Child Tax Credits
\n12.4 Childcare Costs
\n12.5 The Family Element
\n12.6 The Income Disregard
\n12.7 Tax Credits and Salary or Bonus
\n12.8 Tax Credits and Dividends
\n12.9 The Computer Model: Directors with Children
\n12.10 Model Conclusions for Directors with Children<\/p>\n

Chapter 13 Making Payments to Directors and\u00a0Shareholders in Practice\u00a0<\/strong>
\n13.1 Welcome to the Real World
\n13.2 Commercial Considerations
\n13.3 Impact of Dividends on Share Value
\n13.4 Justifying Salaries or Bonuses
\n13.5 Paying a Dividend
\n13.6 Frequency and Amount of Payments
\n13.7 Paying Dividends in Practice
\n13.8 The National Minimum Wage
\n13.9 State Pension Entitlement
\n13.10 Interest Charges
\n13.11 Non-Cash Payments<\/p>\n

Chapter 14 Pension Contributions\u00a0<\/strong>
\n14.1 The UK Pensions Regime
\n14.2 Company Contributions
\n14.3 Personal Pension Contributions<\/p>\n

Chapter 15 The Third Way \u2013 Capital Growth
\n15.1 Maximising Capital Growth
\n15.2 Entrepreneurs\u2019 Relief
\n15.3 What if Entrepreneurs\u2019 Relief is not Available?
\n15.4 Guiding Principles<\/p>\n

Chapter 16 Other Important Points\u00a0<\/strong>
\n16.1 Personal Service Companies
\n16.2 Income Shifting: The Gathering Storm?
\n16.3 Business Property Held by Directors
\n16.4 Directors with Other Income
\nAppendix A Tax Planning Tables<\/strong>
\n Appendix B Sample Documentation<\/strong>
\n Appendix C Tax Rates and Allowances<\/strong>
\n Appendix D Corporation Tax Rates<\/strong>
\n Disclaimer<\/strong><\/p>\n

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Salary versus Dividends by By Carl Bayley BSc ACA   “After recently purchasing Salary vs Dividends just wanted to say how useful it has been in deciding on our company pay structure. The Director shareholders stand to save \u00a310k each. Thanks. I also purchased Using a Property Company to Save Tax and after weighing everything […]<\/p>\n","protected":false},"author":11,"featured_media":0,"parent":1079,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"pagetemplate4.php","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/pages\/1243"}],"collection":[{"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/comments?post=1243"}],"version-history":[{"count":42,"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/pages\/1243\/revisions"}],"predecessor-version":[{"id":16570,"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/pages\/1243\/revisions\/16570"}],"up":[{"embeddable":true,"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/pages\/1079"}],"wp:attachment":[{"href":"https:\/\/www.financial-fluency.co.uk\/wp-json\/wp\/v2\/media?parent=1243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}