Dividends Vs Salary: Directors

With the reduction in employees National Insurance (NI) through the Autumn Statement, to 10% and the drop in the dividend allowance to only £500 from April 2024. Alongside the previously announced rise in Corporation Tax rates. The question directors will ask again is, am I better paying myself a higher salary rather than dividends?

Even with the NI drop, when the calculations are run dividends still come out with the lower tax overall. However the gap is closing and depending on your remuneration structure the appeal of paying your tax on your income through PAYE, rather than having large payments in January and July may mean more than saving some tax. Particularly if cashflow becomes stretched.

For example if you are looking at a remuneration of £100k a year the savings are around £12k a year to pay yourself a minimum salary and the balance as dividends. However if your remuneration structure jumps to £150k a year the savings drop to around £5k.

There is no one rule fits all, the best structure will come down to the level of income you want to take home after tax from the business and the tax bands your company and yourself fall into.

Get In Touch

For more information or advice, contact your local Whitings LLP office.

Disclaimer - All information in this post was correct at time of writing.