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Make the Best of Allowances
Newsletter issue - June 2015.
As the sole owner/director of your company you face a dilemma over how to extract income from that company. If you pay yourself a salary of more than £8,060 per year you will have to pay class 1 NIC at the rate of 12% on the excess pay above that threshold up to £42,385 pa. However, income tax is not due until your salary tops £10,600 (the value of your personal allowance for 2015/16).
One solution is to take a salary of up to £8,060 and any further income as dividends of up to £30,892 pa (£34,325 gross including the 10% tax credit). This combination would mean a zero tax and NIC bill, but gives you an NI credit to qualify for the state pension. However, £2,540 of your personal allowance is "wasted" as the 10% dividend tax credit can't be reclaimed when the personal allowance is set against a dividend.
If your spouse receives a salary that exceeds their personal allowance, but does not pay 40% tax another adjustment is possible. You can now transfer £1,060 of your personal allowance to your spouse. This will allow them to save tax of £212 (£1,060 @20%).
However, to avoid you slipping into the 40% tax bracket you must also reduce the level of dividends you take to a maximum of £29,938 (£33,265 gross) for 2015/16. The result is that the family as a whole has the same tax allowances, but the income tax paid has decreased by £212.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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