Salary for 2014/15

[TheCyclingProgrammer]

I know everybody here has different opinions on what salary to pay themselves, but for those who like to take the most tax efficient salary (in terms of weighing up corporation tax saving vs national insurance costs), have you decided what you're going to pay yourself for 2014/15?

With the personal allowance up to £10k, that's a potential £2k saving in corporation tax and with a £2k allowance for employers NI, it looks like taking the full personal allowance might be the way forward for the next tax year.

My accountant has already mooted the idea and has told me he'll be doing the calculations soon. I'm going to try and crunch the numbers myself if I can find the published rates and information that I need.

Any thoughts?

[TheCyclingProgrammer]

I attempted to put together a spreadsheet but I'm not sure if I've calculated the NI correctly or applied the £2k allowance properly. Please feel free to point out any errors:

https://docs.google.com/spreadsheet/...Xc&usp=sharing

On balance, it does look like taking the full £10k allowance as salary saves about £200 in tax, if I've done my sums correctly.

[GazCol]

My accountant has advised £152 a week - I'd be interested to know if other's have been advised differently.

[TheCyclingProgrammer]

Oh and before we get too excited about the prospect of saving £200 a year in tax, it may well be mostly cancelled out by the reduction in the higher rate threshold, which obviously reduces how much we can take in dividends before paying more tax.

If I'm working this out correct, the maximum net dividend that could be taken if you take your full £10k allowance as salary, is (£31865*0.9) = £28678.50.

After allowing for the employees NI, that brings the total monthly income (salary + dividends) before higher rate tax is due to £3202 and change.

[Martin at NixonWilliams]

A £10k salary is going to be the best option assuming the £2k NI incentive is available to all companies.

There is speculation that the £2k employers NI incentive will not be available to personal service companies on the basis it is designed to boost employment opportunities rather than just to save NI.

This is not something we have reason to believe yet, but Deloitte issued an article to this effect last year and so we are awaiting further clarification before advising our clients.

[TheCyclingProgrammer]

My accountant has advised £152 a week - I'd be interested to know if other's have been advised differently.

Added it to the spreadsheet. It will lose you approx. £170 in tax/NI savings versus £10k salary (again, if my spreadsheets formulae are correct!).

As Martin points out above, the details of this incentive aren't yet finalised hence nothing discussed here is final and indeed I will be waiting for the final advice from my accountant before deciding what to do come April.

[GazCol]

Added it to the spreadsheet. It will lose you approx. £170 in tax/NI savings versus £10k salary (again, if my spreadsheets formulae are correct!).

As Martin points out above, the details of this incentive aren't yet finalised hence nothing discussed here is final and indeed I will be waiting for the final advice from my accountant before deciding what to do come April.

Thread bookmarked!

Thanks for taking the time to do that; it was only this morning that the PAYE girl from the practice contacted me with the optimum amount to pay myself as salary, so I'm, bereft of confidence, hoping they know something I don't.

[TheCyclingProgrammer]

I've added on the dividend calculations so you can see your net dividends and possible monthly take-home after tax, separate from your tax savings and stuck a new tab on for the 2013/14 rates so you can compare.

I'm still not certain if I've calculated it correctly (could one of your friendly native accountants please let me know) but interestingly for the current tax year, the £152/week does seem marginally better than the £646/month I was advised by my (previous) accountant not that I'm going to quibble over a tenner.

On the plus side, despite the lowering of the higher rate, it does appear I'll be about £31 a month better off without paying any higher rate tax (assuming I take the £10k option) in terms of take home.

I probably won't be thinking of that when I put down a deposit for a house later this year and then pay my corporation tax bill in October though!

[Martin at NixonWilliams]

The article I referred to is below:

Every business and charity to receive a £2,000 employment allowance - Employers | UK Budget 2013 | Deloitte UK

[Martin at NixonWilliams]

I'm still not certain if I've calculated it correctly (could one of your friendly native accountants please let me know)

Tax & NI calcs look good to me!