Best salary for 2017/18

[adubya]

Would be nice to know what the optimal salary would be for 1 man company that cannot claim EC. On £12K as a 1 man, I would pay £98 on Tax, £460 on NI and £530 on ENI. Total £1087.89

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£8164 I believe. £0 on tax, £0 on NI, £0 on ENI.

[Drei]

That has already been answered in this thread.

Actually no one has properly. I think I was the only one that provided some kind of calculation. At the end of the day you still want to pay some NI Contribution as you want your state pension to carry on.

@Luisa thanks for the answer and explanation.

[WordIsBond]

Actually no one has properly. I think I was the only one that provided some kind of calculation. At the end of the day you still want to pay some NI Contribution as you want your state pension to carry on.

Not true. You get state pension eligibility if your annual earnings exceed the LEL, which for this year is £5880, even if you don't pay any NICs.

Edit: The reason to exceed £8164 is if you have two employees, to do it with both, to give eligibility for employment allowance. In that case, the optimal is £11,500 -- you pay no employer NI, you do pay employee NI, but you save corporation tax. Since the CT rate is higher than employee NI, this is worth it and you should pay both employees £11,500.

[TheCyclingProgrammer]

Actually no one has properly. I think I was the only one that provided some kind of calculation. At the end of the day you still want to pay some NI Contribution as you want your state pension to carry on.

It was answered by Louisa in the second post of this thread:

If you are the sole employee through your company, I'd recommend £8,164 per annum, then dividends thereafter.

A far more detailed answer - with the same conclusion - was available in the blog post linked to in the original post:

Optimum Directors Salary and Dividends 2017/18 - JF Financial : Online Accountants

[EinsteinTax]

Not true. You get state pension eligibility if your annual earnings exceed the LEL, which for this year is £5880, even if you don't pay any NICs.

Edit: The reason to exceed £8164 is if you have two employees, to do it with both, to give eligibility for employment allowance. In that case, the optimal is £11,500 -- you pay no employer NI, you do pay employee NI, but you save corporation tax. Since the CT rate is higher than employee NI, this is worth it and you should pay both employees £11,500.

One other point to consider is that if the second employee has another source of income it might be better to limit salary to £8,164.

If the income above £8,164 is subject to 20% tax as well as 12% Employees NI, this will be more expensive than the dividend route (19% CT + 7.5% dividend tax).

It's generally only worth paying either employee more than £8,164 if this income also falls within the £11,500 personal allowance.

[WordIsBond]

One other point to consider is that if the second employee has another source of income it might be better to limit salary to £8,164.

If the income above £8,164 is subject to 20% tax as well as 12% Employees NI, this will be more expensive than the dividend route (19% CT + 7.5% dividend tax).

It's generally only worth paying either employee more than £8,164 if this income also falls within the £11,500 personal allowance.

True. If the second employee has another source of income it might be better, from a tax efficiency perspective, to not pay a salary at all, since the income below £8164 would also presumably be subject to 20% tax, and at some point higher rate tax kicks in. And you don't want a salary you pay to push the second employee/shareholder into higher rate dividend tax, either, even if the salary itself isn't in the higher rate band.

Once you start to talk about other income, you probably need to start running specific numbers with specific scenarios, and perhaps pay for advice.