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Salary versus Dividends

How to Extract Company Profits and Cut Your Tax Bill By Thousands

By Carl Bayley BSc ACA

This unique tax guide explains everything you need to know about extracting funds from your company in the most tax efficient way possible. It is essential reading for everyone who runs a limited company.

The latest edition of Salary vs Dividends (Pub date: September 2010) is completely up to date and contains all tax changes announced in the June 2010 Budget.

Tax Tip
The salary versus dividends question has been drastically altered by recent tax changes. Increasingly, the question is no longer just about whether to pay yourself salary or dividends but when to pay them and how much. Other options, like directors loans, are also opening up, giving thousands of company directors the chance to make massive tax savings through the timing and structure of their own pay.

This guide tells you exactly what to do. Clear conclusions and easy to follow tables show you the best pay structure in almost every situation.

What Information is Contained in the Guide?

Salary versus Dividends is written in plain English and contains many practical examples. Subjects covered include:

• All relevant changes from the June 2010 Budget and earlier Budgets.
• How to choose the best mix of salary and dividends for YOU.
• How to get the maximum amount of money out of your company tax free this year.
• Why paying a small salary actually SAVES money and when it’s worth paying a little national insurance to save even more.
• Exactly how much in tax-free dividends you can take this year.
• The cash flow benefits of dividends, why they are under threat and how you can safeguard them.
• The even greater cash flow benefits of paying dividends every second year.
• How to avoid national insurance – the Government's favourite tax on work.
• How changing your pay date can give you a vital cash flow advantage.
• How to ‘pay’ salaries or dividends without taking cash out of your company and why this could ultimately save you tens of thousands of pounds.
• How to get early corporation tax relief for bonus payments – even before PAYE is due!
• How to maximise corporation tax relief on bonus payments.
• How to beat this year’s income tax increases for high earners.
• How, when and why you should pay yourself extra this year – plus how to work out how much to pay.
• Loans to directors - the benefits and pitfalls of borrowing from your own company, how to do it legally and how to do it most tax efficiently.
• How and when to borrow from your company to save or defer thousands of pounds in tax.
• What to do if your company is making a loss and how to use the new loss relief rules to get bigger tax repayments.
• How your optimum pay structure is affected by other income you receive, including rent, pensions, interest and income from other investments.
• Why paying interest on a loan account is often better than salary or dividends.
• The benefits and pitfalls of paying yourself rent.
• How to structure your pay when you’re claiming tax credits.
• How to pay yourself an extra £25,000 and still claim tax credits as if you hadn’t.
• Using your spouse or partner to help achieve further tax savings.
• How to deal with minority shareholders and still make sure your pay is tax efficient.
• The best strategy for family companies owned by brothers and sisters or other relatives.
• How to structure your pay when you pass the state retirement age.
• How the national minimum wage affects directors’ pay and how to make sure it doesn’t.
• How making pension contributions affects your optimum pay decision.
• Why your company’s accounting date affects your optimal pay structure.
• Sample documentation to help you keep the taxman happy.
• The long-term benefits of maximising capital growth by reinvesting profits – keep your maximum tax rate to just 10%.
• Why paying a dividend now might save you up to £900,000 when you sell your company – up to £1.8 million for a couple.
• Dangers to watch out for: what do ‘Arctic Systems’ and ‘income-shifting’ mean for you?

Some of the most interesting information in the guide comes from a selection of tables constructed using a program we developed at Taxcafe. These tables will help you construct your optimal pay package. They take account of ALL the taxes affecting you and the company, including income tax, corporation tax, national insurance paid by you and national insurance paid by the company.

Click here to read the full contents listing and first chapter of the book

 

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