Take-homes up from April

[FK1]

It just a director exercise to get close to the big picture, not an accountant figures.

Example C.
Sales £40000 excl. VAT
Salary £8,424
Expenses £1,000

Taxes
PAYE £0
Corporation Tax = £5,809.44 = (40,000.00 - 1,000.00 - 8,424) * 0.19*
Dividends tax (on £30,576.00 - £5,809.44) = £1,450.54 = (£24,766.56 - (11,850.00 - 8,424.00 + 2000))) * 0.075*

So taxes in total £7260 on £40000 sales while take home in that year £31740

Example D.
Sales £40000 excl. VAT
Salary £20000
Expenses £1,000

Taxes
PAYE £3,017.32 + £1,597.49. Net Wage £16,982.68.
Corporation Tax = £3306.48 = (40,000.00 - 1,000.00 - 20,000 - 1,597.49) * 0.19*
Dividends tax (on £14,096.00) = £907.20 = (£14,096.00 - 2000))) * 0.075*

So taxes in total £8828 on £40000 sales while take home in that year £30171

The tax loss for £20K option salary seems to be £1568. Still like an accountancy fee
OK. I made mistakes for sure but get the picture.

I have the second shareholder with its own income so will continue to figure out my salary.
But yes the recommended £8,424 or £11,850 seems to be correct advice.

[FK1]

It's great fun advising English and Scottish clients from this year

Thankfully for most contractor models of low salary and dividends, it won't make too much of a difference.

It is declared that
Option 1 £8,424
Option 2 £11,850
are the most tax efficient salary and then dividends.

Some reality check examples I am trying to calculate (that could be mistaken!)

Example A.
Sales £80000 excl. VAT
Salary £8,424
Expenses £5,000

Taxes
PAYE £0
Dividends tax (on £37,926.00) = £2,437.5 = (3.160.50 * 12 - (11,850.00 - 8,424.00 + 2000))) * 0.075
Corporation Tax = £12,649.44 = (80,000.00 - 5,000.00 - 8,424) * 0.19

So taxes in total £15,086.94 on £80000 sales while take home in that year £46,350.

Example B
Sales £80000 excl. VAT
Salary £20,000
Expenses £5,000

Taxes
PAYE £3,017.32 + £1,597.49. Net Wage £16,982.68.
Dividends tax (on £26,350.00) = £1569.3 = (26,350.00 - (11,850.00 - 8,424.00 + 2000))) * 0.075
Corporation Tax = £10,146.48 = (80,000.00 - 5,000.00 - 20,000 - 1,597.49) * 0.19

Taxes in total £16330.59 on £80000 sales while take home in that year £43,332.68

The difference between paying 8K and 20K salaries is £1,244 in tax on £80K.
I.e. if want £20K salary then pay £1,244 more in tax. A lot? Ok, it is the same an accountant fee

Doing that calculation for twice less sales...

[craigy1874]

It's great fun advising English and Scottish clients from this year

Thankfully for most contractor models of low salary and dividends, it won't make too much of a difference.

[Batcher]

No Changes to Corp tax rates. If you live in Scotland - Your tax rates way different.
Higher tax band is £44,274.

[Wijay@WISAccountancy]

https://www.contractoruk.com/news/00...allowance.html

As outlined, even though the dividend allowance is going down, the other allowances/bands are moving up.

Isn't there a new corporation tax kicking in as well?

A contractor bonus from the chancellor

No Changes to Corp tax rates. If you live in Scotland - Your tax rates way different.
Higher tax band is £44,274.

[blacjac]

.

Isn't there a new corporation tax kicking in as well?

Not this year

[DolanContractorGroup]

Corporation tax remains at 19% from 1st April 2018.

The example is effectively treating the flat rate scheme, still in the 1% discount phase as a like for like comparative (So not effectively a second year).

[northernladuk]

Therefore, Dan’s take-home pay (after tax and NI) is £52, 591.49 (salary and dividends after tax).

Shum Mishtake shurly

What is 'Take-Home Pay'

Take-home pay is the net amount of income received after the deduction of taxes, benefits, and voluntary contributions from a paycheck. It is the difference between the gross income less all deductions. Deductions include federal, state and local income tax, Social Security and Medicare contributions, retirement account contributions, and medical, dental and other insurance premiums. The net amount or take-home pay is what the employee receives.

American flavoured but gives you the essence.

Take Home Pay doesn't include dividends.

[barrydidit]

Dan's flat rate surplus remains at £1,120 in the second year so i'm not sure those numbers are accurate.

[PerfectStorm]

https://www.contractoruk.com/news/00...allowance.html

As outlined, even though the dividend allowance is going down, the other allowances/bands are moving up.

Isn't there a new corporation tax kicking in as well?

A contractor bonus from the chancellor