Salary versus Dividends

& Other Tax Efficient Profit Extraction Strategies

by Carl Bayley & Nick Braun

Salary versus Dividends is essential reading for ALL company owners and directors.

Written in plain English with dozens of examples, this unique guide shows you how to save thousands of pounds in tax every year by choosing the best mix of salary and dividends.

The new 25th edition was published in September 2024.

It also contains lots of new information on the benefits of paying yourself a significantly larger salary – recent changes have made this strategy much more attractive from a tax saving standpoint.

The guide also shows you how to reduce your tax bill further by paying yourself rent or interest and using directors' loans, company pension contributions and other powerful profit extraction strategies.

What Information is Contained in the Guide?

Subjects covered include:

• All tax changes announced to date.
• A plain English guide to how companies and company owners are taxed.
• How to choose the best mix of salary and dividends for YOU.
• How that mix is affected when you have other income from outside the company (e.g. rental income).
• How couples can extract £100,540 this year with a total tax bill of just £6,422.
• How to make the most of the 8.75% dividend tax rate and avoid paying 33.75% tax.
• Why some older directors can enjoy a salary of over £45,000 free from national insurance.
• Why paying your salary monthly or as a lump sum may affect the amount of corporation tax relief enjoyed.
• When it may be better to take much more or most of your income as salary. The guide contains numerous examples of how this strategy may pay off thanks to recent tax changes.
• How to reduce your payments on account by postponing dividends even just days.
• How to pay tax-free salaries to family members (including minor children).
• How splitting your income with your spouse/partner could save over £11,000 annually!
• How to avoid the 56.25% tax rate that kicks in when your income exceeds £100,000.
• Several chapters of vital tax planning ideas for high income earners and additional-rate taxpayers.
• Using a company versus being a sole trader or partnership: how much tax are you saving?
• How more company owners can protect their child benefit following recent changes.
• Fully updated information on the best alternative profit extraction techniques, including:
• Loans to directors - In one example a director saves over £37,000 by taking a loan from their company instead of dividends
• Rental income - More tax efficient than salaries or dividends in many cases
• Interest income - How company owners can pay themselves up to £6,000 tax-free every year
• Pension contributions - You could end up paying just 15% tax compared with a 51% overall tax rate on dividend income.
• Charitable donations - How to benefit your favourite charity by more than £3 for every £1 you give
• Capital Gains - How to pay 10% tax when you sell or wind up your company or 0% with an employee ownership trust
• How to declare dividends properly.
• When to avoid higher-risk tax planning strategies (dividend waivers, alphabet shares etc).
• How to save up to £3,770 in capital gains tax by altering your dividends when you sell assets like property.

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