How to Pay Yourself from a Limited Company UK | Best Way to Pay Yourself as a Director in 2024/2025
Vložit
- čas přidán 2. 08. 2024
- Discover the Best Way to Pay Yourself as a Director of a Limited Company for the Tax Year 2024/2025.
As a director of a limited company, determining the most tax-efficient salary for yourself is crucial. Let's delve into the recommended salary approved by accountants for this fiscal year.
Salaries exceeding this threshold face double taxation, subject to both employer's NI at 13.8% and employee's NI at 8%. Hence, diverting dividends above the primary threshold proves a wiser approach, as NI doesn't apply to dividends.
Income tax and NI thresholds remain unchanged this year. Frozen thresholds, combined with rising salaries, translate to increased tax revenues for the government.
Combining a basic salary with dividends typically emerges as the most tax-efficient remuneration method from a limited business. Basic salary usage maximises the tax-free personal allowance, while dividends offer a favourable tax regime compared to the conventional income tax and NI combo.
Nevertheless, individual circumstances may warrant a full PAYE salary. It's advisable to consult an accountant to ascertain the ideal director's salary for your limited business.
For the 2024/2025 fiscal year, income tax rates and thresholds are as follows:
- Personal allowance: £12,570 (0%)
- Basic rate: £12,571 to £50,270 (20%)
- Higher rate: £50,271 to £125,140 (40%)
- Additional rate: £125,140+ (45%)
On the other hand, dividend tax rates and thresholds for the same period are:
- Basic rate: £13,071 to £50,270 (8.75%)
- Higher rate: £50,271 to £125,140 (33.75%)
- Additional rate: £125,140+ (39.35%)
Key Facts About Dividends:
- Payable to shareholders from current or retained profits
- Can be disbursed monthly, quarterly, or annually
- Taxed via self-assessment
- Tax-free dividend allowance for 2024/2025: £500
National Insurance rates and thresholds for 2024/2025 include:
- Lower Earnings Limit (Pension Threshold): £6,396 per year
- Primary Threshold (Employees): £12,570 per year
- Employees Rate: 8% up to £50,270, 2% thereafter
- Secondary Threshold (Employers): £9,100 per year
- Employers NI: 13.8% above the secondary threshold
Corporation tax rates and thresholds for 2024/2025:
- Less than £50,000 (Small Profits Rate): 19%
- £50,001 to £250,000: Marginal Relief
- £250,000+: 25%
Most Tax-Efficient Director’s Salary for 2024/2025:
- Recommended Salary: £12,570 per year / £1047.50 per month (Dividends for amounts above)
- Utilizes personal allowance fully
- Above LEL threshold for state pension eligibility
- Below primary threshold (no employee NI)
Corporation tax savings on allowable business expenses:
- Salary
- National Insurance
- Pensions
The costs below can be expensed if solely used for your business:
- Startup costs (can be claimed up to 7 years before the company starts trading)
- Health check and eye test expenses (if you use computer screens as a big part of your job)
- Business insurance expenses
- Advertising, marketing and PR expenses
- Accommodation expenses for business trips
- Bank charges
- Phone bills
- Equipment expenses including phones, computers and more.
Timecodes:
0:00 - Intro
1:25 - Income Tax
3:16 - National Insurance
8:40 - Corporation Tax
10:29 - Dividends
13:53 - My Recommended Salary
14:15 - Reasons for Recommended Salary
------------------------------------------
SCHEDULE A 1-2-1 COACHING CALL WITH ME
🤝 bit.ly/3UbUSeN
------------------------------------------
REGISTER A VIRTUAL OFFICE IN THE UK
🏢 bit.ly/3S85qch
------------------------------------------
MARGINAL RELIEF CALCULATOR
💰 bit.ly/4cwgjhn
------------------------------------------
CZcams VIDEO ON HOW TO REGISTER A COMPANY
📹 • How to Register a UK L...
------------------------------------------
SUBSCRIBE TO MY CHANNEL
🔴 / @theholistichustle
------------------------------------------
I'll be releasing more Business, E-Commerce and Marketing related content. So if you found this video helpful and want to stay tuned with more videos then please subscribe to my channel so I can keep these videos coming!
Let me know if this has helped in the comments below! - Jak na to + styl
Cracking vid mate, looking forward to the one about expenses! Hope it's coming soon!
Good video thanks My Guess is the next video you do is about Dividend tax rates being the same as Income Tax rates with a Labour Govt its been too good for two long low salary high dividends I hope I am wrong if it happens its a 11% tax increase so even as a basic rate director your paying 40% tax as a higher rate tax payer it dosent bare thinking about and i bet there are pension changes on the way too
Excellent video buddy, i am just starting out on this path, lots of info and given across in an easy, digestible way. Thanks for taking the time to put this out there.
Thanks 🙏 .. I remember finding everything quite overwhelming at the very start too but definitely don’t let that put you off and things get a lot easier with time and knowledge, good luck with business for now 🙌
Great informative video. One tiny suggestion might add topping on the ice-cream. Sound is a bit echoie.
Thanks for your comments and thanks for the heads up, I’ll get that sorted in the next one. Until then, best of luck with your business 🙌
Fantastic video, super clearly explained and so helpful, thank you! Subscribed - looking forward to the video on tax deductible business expenses.
Thanks for your comments Aleksei! I’m glad you found it helpful and I wish you the best with business for now 👌
This was fantastic. Thank you for explaining it in human terms!
Thanks for your comments Tanya! I’m glad you found it useful and simple to understand. These topics tend to be unnecessarily complicated. Good luck with your business!
Happy to see you back, man!
Thanks Dan! Its been a busy year but it feels particularly good to be back on here 🙌
Man, I just followed your step-by-step instructions to set up the Ltd two months ago, and I will register the trademark; please let me know if there are any changes in the process!
Thank you so much 🤓🙌@@TheHolisticHustle
Very useful. However, does auto enrollment for pensions apply to directors like other employees?I am not impressed with the expensive auto enrollment options available, hence have limited salary to £750pm to avoid employers NI and to avoid auto enrollment (company pays into a SIPP instead).
Very well outlined ... Great guy
Thanks for your comments and best of luck with your business 🙌
Thank you ❤
My pleasure and glad I could help! 🙌
Thankyou x
My pleasure and good luck with your business! 🙌
Good video
Thanks for your commenting and I wish you the best with your business. Feel free to get in touch if you have any questions etc 👍
At 7:29 you state the 15 years pro rata payment as £116.49 per week. Should this not be £87.36? (£203.85/35 x 15)
Hi Mike, you’re absolutely spot on. Not quite sure what happened there but I’ll try to add something to the video as a correction, thanks!
Hi, this is probably a stupid question (But rather stupid questions than stupid mistakes). Are the income tax numbers per month or per annum?
Hey Jay, if only they were per month 🙏.. all the number are per year and I think I’ve broken it down into monthly figures in a couple of areas to put it into perspective but you’ll see those numbers as labelled ‘per month’. Hope that’s helped 🙌
I found your video to have great content! I'm starting as a freelancer with a £400 day rate. Could you please let me know if you have any videos or playlists that guide me through the process from setting up a limited company and bank account to PAYE setup?
P.S. I want to do this on my own and learn instead of hiring a CA.
Hey VR,
I have a video on how to set up a limited company which you could use to register your company: czcams.com/video/1KjVQ62P21E/video.html
If you need any more help then feel free to get in touch with me for a 1-2-1 coaching session: bit.ly/3UbUSeN
Hope that helps and good luck for now 🙌