2023/24 Remuneration Planning – Salary V’s Dividends
It has been well known in recent years that for the majority of small and medium sized businesses, the most tax efficient way for shareholders to draw out profits from their companies was to put through a small salary, usually up to the National Insurance and Personal Allowance thresholds, and then top this up with dividends.
This strategy may need to be revisited with the introduction of higher corporation tax rates from 1 April 2023, as company profits in excess of £50,000 will fall within marginal rates of corporation tax, which could increase up to 25% depending on the level of taxable profits.
Alongside salaries and dividends, director/shareholders could consider other tax efficient remuneration, such as employer pension contributions and benefits in kind, including electric vehicles.
There are lots of factors to take into account, including the level of distributable profits and affordability. We could suggest that we set up a meeting with you a couple of months before the company year end so that we can give you the best advice.
For further information on remuneration planning, please contact us on 023 8046 1244 or email James Flood.