An optimal director salary and dividends in 2021-22 following the UK Budget 2021 announcements by the chancellor. In today's video we're going into much more detail about these changes and how they will affect your business and personal taxes. We've also put together a FREE downloadable guide to help you follow along as well as a calculation of how to pay just 7.5% tax on a director's total remuneration of up to £50,270, so stay tuned.
🌏 DOWNLOAD your FREE guide to help you follow along → [ Ссылка ]
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⏱️ Time Stamps:
1:17 - Income Tax Rates & Thresholds
3:21 - Full Suite of Personal Allowances
5:38 - National Insurance Rates & Thresholds
11:17 - Dividends Rates & Thresholds
12:46 - Tax Optimal Directors Salary & Dividends
If you want my & my team's expert accounting and tax help, you can book a discovery call through our website → 🌏 [ Ссылка ]
★ In 2021-22 the income tax bands are:
• Personal Allowance = £12,570 (0%)
• Basic rate = £12,571 to £50,270 (20%)
• Higher rate = £50,271 to £150,000 (40%)
• Additional rate over = £150,000 (45%)
The National insurance thresholds that you need to be aware of when paying yourself as a business owner.
☆ The Lower Earnings Limit (LEL) threshold is the point at which you qualify for state benefits such as your pension. As long as you pay yourself above this threshold then you will get your pension credit every year.
• £120 per week
• £520 per month
• £6,240 per year
☆ The National Insurance Primary Threshold is when as an employee of your Ltd company you start paying employees NI.
• £184 per week
• £797 per month
• £9,568 per year
The primary threshold is subject to national insurance at 12% between £9,568 and £50,270, and anything over that is at 2%.
☆ The National Insurance Secondary Threshold as your Ltd company (the employer) begins paying employers NI on behalf of your employees:
• £170 per week
• £736.67 per month
• £8,840 per year
The secondary threshold does not have an upper limit so anything over £8,840 is taxed at 13.8%.
The dividend allowance for 2021/2022 is £2,000. This is tax free and the same as the previous year 2020-21.
☆ The dividend rates for this year are:
• Dividend allowance = £2,000 (0%)
• Basic rate = £14,571 to £50,270 (7.5%)
• Higher rate = £50,271 to £150,000 (32.5%)
• Additional rate over = £150,000 (38.1%)
☆ The main rate of corporation tax will be increased to 25%, currently at 19%. But, this will not happen until the 6th April 2023, so you as a Limited company business owner has another 2 years before the change takes effect.
And what’s more, the new 25% rate is only applicable to limited company pre-tax profits of £250,000 or more. If your pre-tax profits are only up to £50,000, then your limited company will only pay the current rate 19%, to be re-labelled the small business rate from the 6th April 2023.
So as things currently stand, no matter what size your limited company is in terms of pre-tax profits it generates, it will only be liable to 19% of corporation tax in 2021, 2022 and up to the end of March 2023.
★ Dividends vs Salary
There are few ways you as a limited company business owner can pay yourself tax optimally. The most popular and tax efficient way is by a optimal director salary and dividends.
Dividends vs Salary UK should be planned carefully upfront and before the new 2021-22 tax year begins. If you have an accountant, you may want to discuss this with them as they will need to make changes to your PAYE salary and their systems to make sure it is administered properly.
However, tax optimisation should not be your sole consideration when planning for the 2021-22 tax year. There are some circumstances and advantages as a business owner in paying yourself a higher salary than the thresholds presented in the video.
We hope this video has helped you understand the UK budget 2021 changes and taken you one step closer to knowing your numbers.
★☆★ OUR MISSION ★☆★
Me & my team are dedicated to helping and empowering YOU to 'Know Your Numbers' so you can make calculated and informed decisions in your business, company and personal finances towards your definition of success.
★☆★ OUR PHILOSOPHY ★☆★
If you take care of your numbers (finances), your numbers will take care of you, your family and those you value the most.
🔴 DISCLAIMER
Our videos are for general guidance, education and empowerment in helping you understand accounting, tax and your numbers. They in no way constitute specific advice to your specific circumstances. Me & my team would be delighted to help you with your specific queries or accounting requirements through a formal engagement.
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