Plan B turnover amount?

[Spoiler]

Now then - plan B is in the inception stage. However, I need to work out a target for year 1 turnover and am hoping some clever people here can assist!

Plan B will consist of 4 people (all directors & employees) - if all 4 will be taking home £2,000 a month in salary equivalent, any idea what the basic turnover of the company would need to be?

I guess if we were just employees, then we'd be looking at an annual salary of around £33k to get a £2k take home, but as directors we should be able to be more tax efficient, which would mean less turnover needed? Also need to include the employers contributions for tax\NI.

I'm working on a list of other costs which will bump up turnover requirements (accountant fees, expenses, etc) but it was the salary + dividend stuff I'm struggling with.

[northernladuk]

Do you want us to include our consultancy charge or do you want to pay that in cash?

[JamJarST]

Now then - plan B is in the inception stage. However, I need to work out a target for year 1 turnover and am hoping some clever people here can assist!

Plan B will consist of 4 people (all directors & employees) - if all 4 will be taking home £2,000 a month in salary equivalent, any idea what the basic turnover of the company would need to be?

I guess if we were just employees, then we'd be looking at an annual salary of around £33k to get a £2k take home, but as directors we should be able to be more tax efficient, which would mean less turnover needed? Also need to include the employers contributions for tax\NI.

I'm working on a list of other costs which will bump up turnover requirements (accountant fees, expenses, etc) but it was the salary + dividend stuff I'm struggling with.

Directors can't take dividends only shareholders can, so are all the diectors also shareholders? If they are is it 25% each? What does your account or financial advisor say?

[Clare@InTouch]

If you're looking at salary only, then you need a gross salary of £31,566 to get £24,000 after tax, assuming a normal tax code. That results in NI of £3,323. So £34,889 altogether.

More tax efficient would be to do the usual low salary & then dividend top up, as you would with a contracting company.

[Spoiler]

Directors can't take dividends only shareholders can, so are all the diectors also shareholders? If they are is it 25% each? What does your account or financial advisor say?

Yes, sorry. All directors are shareholders - 25% share.

Am speaking to an accountant later today. Just wanted to go armed with my own figures (well, not mine, someone's here hopefully!) to be able to do a comparison.

[Spoiler]

More tax efficient would be to do the usual low salary & then dividend top up, as you would with a contracting company.

That's what I'm after - paying each person as efficiently as possible (low salary & divis), so it equates to a take home figure of £24k each in year 1.

[Clare@InTouch]

That's what I'm after - paying each person as efficiently as possible (low salary & divis), so it equates to a take home figure of £24k each in year 1.

So £624 a month salary and £1,376 in dividend.

Keeping in mind that dividends can only be paid from profits, so you'll need to keep an eye on your management accounts to check there's enough profit after tax to pay them.

You could look into salary sacrifice re childcare and pension payments too, if any of the shareholders prefer that (so pay £624 salary, £376 into their pension, and £1,000 dividend) as that could lower the CT further.

[Spoiler]

So £624 a month salary and £1,376 in dividend.

Thanks - so that is the £2k take home figure. Now I need to find out how much the business would have to make in order to meet that. What would be the tax implications on top (employer\employee), plus corporation tax be (divi money comes out of profit, which has been taxed already, right)?

[ASB]

That's what I'm after - paying each person as efficiently as possible (low salary & divis), so it equates to a take home figure of £24k each in year 1.

24k x 4 = 96k. Gross up for CT = 120k. So this needs to be your profit target in order to be able pay divs of 2k net per month.

This wouldn't be the most tax efficient. If you paid a salary of 8k (ish) this would cost very little NI and no tax saving a total of about 6k on the total tax paid for all 4.

Remember you can only pay divis out of profits.

Edit: but Clare has just said that with more accurate figures.

[JamJarST]

Thanks - so that is the £2k take home figure. Now I need to find out how much the business would have to make in order to meet that. What would be the tax implications on top (employer\employee), plus corporation tax be (divi money comes out of profit, which has been taxed already, right)?

IMHO you are doing this all wrong. You should be developing a plan of what you think the Plan B can achieve and then seeing what is available for salary and dividend after that.