How to Pay Yourself as a Ltd Company UK | BEST Directors Salary 2023/2024
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- Опубликовано: 29 сен 2024
- The MOST TAX EFFICIENT SALARY to pay yourself as a Director of a Limited company in 2023/2024. This is the EXACT Director's salary that I will be PAYING MYSELF this year.
For the majority of small businesses, a combination of a basic salary and dividends will be the most tax efficient way to yourself from a Limited company in 2023/2024.
For the past 4 years, I have released videos explaining the BEST way to pay yourself from a Ltd company.
In previous years, I have recommended that directors pay themself a basic salary up to the Secondary National Insurance threshold, however, that is no longer the case.
The secondary NI threshold has recently been increased to match the personal allowance at £12,570. This means it is now more tax efficient to take a slightly larger base salary.
Here are some of the key pieces of information from this video that you may find helpful:
These are the Income Tax rates and thresholds for 2023/2024:
• 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%)
Note: You lose £1 of your personal allowance for every £2 you earn over £100,000
These are the National Insurance rates and thresholds for 2023/2024:
• Lower Earnings Limit (Benefits Threshold) - £123 per week / £533 per month / £6,396 per year
• Primary Threshold (Employees) - £242 per week / £1,048 per month / £12,570 per year (aligns with personal allowance)
• Employees Rate: 12% up to £50,270 and 2% over £50,270
• Secondary Threshold (Business) - £175 per week / £758 per month / £9,100 per year
• Employers NI = 13.8% above the secondary threshold (no reduction over £50,270)
National insurance is the main reason why directors pay themselves Dividends, it helps avoid the double taxation of combined employees and employers National Insurance which would be 25.8%!
Corporation Tax
• Payable against net profits made by a Ltd company
• Allowable business expenses can be offset against profits to reduce your corporation tax liability
• Your salary & employers NI are allowable business expenses
Corporation tax rates for 2023/2024
• Less than £50,000 (Small Profits Rate) = 19%
• £50,001 to £250,000 = Marginal Relief
• £250,000+ = 25%
Dividends Explained
• Dividends are payable to shareholders from profits or retained profits from previous years
• They are not subject to National Insurance or Income Tax, instead, they are taxed separately via a Dividend tax.
• Dividends can be paid monthly, quarterly or at any time throughout the year (interim dividends) or after the annual accounts (final dividends)
• Dividend tax is paid via self assessment
• The tax free dividend allowance for 2023/2024 is = £1,000
Dividend tax rates for 2023/2024
• Basic rate = £13,571 to £50,270 (8.75%)
• Higher rate = £50,271 to £125,140 (33.75%)
• Additional rate = £125,140+ (39.35%)
Optimal Director’s Salary 2023/2024
• Recommended Salary: £1047.50 Per Month / £12,570 Per Year (Above this use dividends)
• Makes full use of the personal allowance (no income tax due)
• Above the National Insurance LEL threshold to qualify for benefits e.g. state pension
• Below National Insurance primary threshold (no employees NI due)
• Above National Insurance secondary threshold so employers NI becomes due from £9,100 to £12,570(£3470 at 13.8% = £478)
• However, this is tax deductible from corporation tax at a minimum of 19%: £3470+ £478 at 19% = £750 (Save £272)
• Note 1: NI payments will need to be made to the HMRC monthly/quarterly, the best salary that doesn't require National Insurance payments is £9100 per year.
• Note 2: A £5,000 Employment Allowance is available to Ltd companies with at least 2 directors/employees (inc. husband & wife directors) earning above the NI Secondary Threshold
Dividends vs Salary
For many small businesses, the most tax efficient way to pay yourself is with a small salary and then dividends on top. However, in some situations, it may be more tax efficient to pay a full PAYE salary instead. Always check with an accountant what the best directors salary would be for your Ltd business.
How do you pay yourself as a director of a Ltd business in 2023/2024? Let us know your plans in the comments below!
▶ Here is my NEW VIDEO with the LATEST FIGURES for 2024/2025: ruclips.net/video/0AsgCD6uIKc/видео.html
This is why HMRC has so many employees. Life should not be this complicated.
A good video setting out the basics. I'm amazed at the number of people asking for updated videos or videos tailored to their specific circumstances. Go see a decent accountant who can discuss your precise circumstances.
How to pay yourself. Have an offshore holding account as the businesses main account so you avoid tax. Pay the director a nominal salary of £1 a year , then pay the director a non repayable loan for whatever you want Simples.
Its what most major corporations do and most senior politicians.
You still pay VAT and corporation tax right?
Regarding the 5000 allowance... what if one of the directors is already employed by some one else and earning 45k? how does that benefit them with NI?
is basic rate not up to 37,700 instead of 50,270?
Hi dear. I just want to ask if my unused personal allowance and tax free dividend is not up to £13,571 do i need to pay dividend tax
Mate follow Hornseywoods truth talk, blows this away
how do you pay your mamma as an LKHT45 company?
Interesting. Would love to see a part II where you include the dividend payouts in the calculations for hypothetical turnovers of, say, 100k and 200k. Part III could include assesments of when it’s best to just leave some profits in the company, e.g. to invest in the stock market through the company to build up your own pension fund that you can pay yourself from in the future.
Can you do this?
Yup, one of the great benefits of being a company director is the pension you can have. You can buy commercial property through your company pension too, in a type of arrangement called an SASS. Worth doing a deep dive into. If you have the option to work for yourself through your own LTD company vs being an employee then there are benefits to doing so.
Turnover has got nothing to do with profits
@@Endurorodzndubz Well, turnover is normally the basis of your profits, but apart from that, how is this relevant to the question?
@@Endurorodzndubz Turnover is vanity. Profit is sanity. Cash is King. One look at Amazon shows volume turnover with very minimal taxable profit. On their turnover the £12750 tax free payment would require over £200,000 at their nominal 5% profit margin. Turnover is irrelevant, as you wisely stated. It’s about the tax deductible expenses and investing in short term infrastructure that keeps Amazon’s reported margins so low. You only pay tax where it’s unavoidable, employee PAYE, which is why growth companies are so supported by governments.
Hi, would it be possible for you to make a video with an extra scenario where the director also has employment income? Would love to see the interplay between the two. Thanks!
Absolutely applies to all side hustle directors. Please do !
Is this a good time to buy stocks? I know everyone is saying stocks are at a discount and all, but just how long will It take for us to recover, obviously there are strategies to maneuver in this present market but these strategies doesn't come common to the average folk, or am I better off putting my money elsewhere?
@Azeez Nafiu The uncertainties accompanying this present market is more reasons I have my daily investment decisions guided by a portfolio-coach seeing that their entire skillset is built around going long and short at the same time, both employing profit-oriented strategy and laying off risk as a hedge against the inevitable downtrends, coupled with the exclusive information/analysis, it's quite impossible not to outperform. Netted over $1.5m in return on investment, since using a coach for about 2years.
@@MaryTongx "Christy Vallen D'souza" google that name and thank me later
Absolutely the video I needed. Straight to the point and broken down clearly! Keep it going!
You work for 40yrs to have $1m in your retirement, meanwhile some people are putting just $10k in a meme coin for just few months and now they are multimillionaires. I pray that anyone who reads this will be successful in life
Starting early is the best way of getting ahead to build wealth, investing remains a priority.
People prefer to spend money on liabilities , Rather than investing in assets and be very profitable.
I urge everyone to start somewhere now no matter how small, this is literally the time for that, forget material things, don't get tempted, I became more better the moment I realized this.
To be a successful person in life requires him or her of hard work and time
@@heatherkay4982 Talking about been successful. I know I am blessed if not I wouldn't have met someone who is as spectacular as Kayla Malone
thank you! Can you please make a video about the best way to invest company profits so that I can make gains on the cash that's sitting there rather than it drowning in inflation? I'd like to put some profits into digital; assets and cash out the gains which would be a nice bonus.
No accountant has ever told me that employer's NI is a legitimate business expense. You've just saved me some money. Thank you!
You shouldn't need telling!
@Awreet Meowd have you never learnt anything, from anyone, ever?
@@googlesucks925 Of course, I've just learnt that I should write better comments, I meant the accountant should do it anyway.
@@awreetmeowd ah ok I'm with you. Totally agree but you'll be surprised how many don't.
You need better accountants! ;)
It is completely incorrect to say that dividends are not subject to income tax, they are, but at a different rate. Crucially, dividends contribute to the total income liable for tax, including taking you over the £100k threshold at which the personal allowance starts to be withdrawn. In that case, it is worthwhile reducing your income liable for tax by paying the excess into your pension fund or making donations to charity. That’s what I do because I would much rather choose how my money is spent rather than let the government squander it on my behalf.
and keeping in mind that Dividends are paid out from TAXED profits, dividends are never tax-free, even your £1000 annual dividend allowance
Quick Question: at 11:19 Regarding employment allowance with LTD companies with at least 2 directors. Is it "directors" or "employees" I didn't think it had to be 2 directors, it's called employment allowance and not directors allowance. Please correct me if I am mistaken.
I'm not sure this is particularly honest. its certainly immoral not to tax yourself at the levels your employees are. Secondly i work in insolvency and there are hundreds of Directors who wonder why i come after them to repay illegal dividends after they've bled their company dry taking a "regular" dividend when their company has been losing money hand over fist. You may have pointed out that you can only pay dividends out of profits but it was so fast no one would have noticed it and you certainly didn't point out the potential consequences
Tories increasing taxes... You can tell things are truly fucked. If you couldn't tell already that is.
What would you recommend if you want to maximise your SIPP contribution which is 40k going to 60k?
Thanks for sharing such valuable information! Just a quick off-topic question: I have a SafePal wallet with USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). Could you explain how to move them to Binance?
I am too stupid to understand this, but thank you for for providing this useifl information
As a chartered tax adviser, your understanding of everything is bang on (I know you're not looking for validation) and as you said, is likely explained better than most accountants will.
The disclaimers in your video are very important too, this is not a one method fits all. For anyone with varied income sources or a high profit (£50k+) limited company, speak with a qualified accountant or if you can, a qualified tax adviser to ensure you are paying the lowest amount of tax possible.
Great video.
Great! Can you utilized the unused personal allowance at the end of the year? Like get salary for last three months?
I did nôt To get the Last page… salary. Why 9000 minus 12000. ?
Why didn’t you add the best amount of dividends to pay?
If the director is not resident in the UK, can he pay himself by PAYE? It seems that the director who is not resident in the UK cannot get the UTR required by PAYE, can the UTR obtained by SA1 be used for PAYE?
"Good morning,
I'm interested in closing my limited company along with its registered brand. While I'm familiar with the process of closing a limited company, I'm uncertain about the implications for the brand.
If I close the company, will the brand automatically be closed as well?
If not, could you please advise me on the procedure for closing a registered brand in the UK?"
But the messing about with HMRC with NI payments takes so much time that £270 isn’t a saving
What would be the optimal directos salary for 4 owners (two married couples) with a company turning over 100k annually ? Would the same allowance and principles apply? Could they all use the same structure to maximise their tax allowance ?
Great stuff, a similar video but for people with a side hustle would be great to see. I'm earning just below the 40% income tax bracket with a side hussle income to work in some how. Would be really good to get your option on the most tax efficient way to work this :) Thanks
You can’t avoid tax when your basic tax free allowance is eaten up by your salary. A side hustle must morph into a business as your sole income to take advantage of what’s described here.
Thank you. But I did. Not get the last page. Salary. Why 9000 was deducted from 12000 ?
I see why people seek work in other countries and tax free! So if I will earn £1000000 a year or per deal , will I have to pay %60? Oh Lord, May Allah bless the working class in Britain.
What would the best way be if you earned 100K/year through a PAYE full time job as well as through an ltd for property
Guys tell me something if you invest your LTD company's incomes before the end of self assessment date into stocks, private pension or bonds is that legal and if so, is that the right way to avoid paying corporation taxes ? or company still be taxed before doing so?
What I've learned is basically I'll be taxed out of existence.
Time to head out of the UK like anyone with a brain is doing.
I have two small companies with my wife, so isn't it better to pay ourselves 9100 from one company and the remainder up the 12570 from the other company? Because then we literally have 0 employers NIC? (While the company paying 9100 gets us the NI stamp)
Are you working on the 2024/2025 update of this for the channel?
Great video. Would love to know more about what to do with dividends. Trying to get my money out of my business is a head pickle, 12k a year probably pays for the groceries!
Can you do a calculatuon on more realistic ernings around 50k , no offence to anyone but cannot imagine anyone surviving on 12k. Or yoir advise is to just stick to 12k and pay out rest in dividends
So if it's a husband and wife or to director company, the optimal salary for both is still 12570 and with the employment allowance this means there's no employers Ni No employees NI and no employees acts correct?
Tax efficient way is Offshore. Anything else is waves in a bucket.
I wanted to ask what if you're working as part time employee, how do you combined and what's the suitable payment to pay yourself using PAYE under the limited company?
This is clear and useful. The explanation however should go further to include the dividend element that would otherwise have been paid if you had the £9100 salary, so you don’t show the ct saving from the higher salary only
Assuming you top up your income with dividends you will have no unused personal allowance left to offset, so you will pay dividend tax on the extra £3,470 @ 8.75%, i.e.£303. So, you save £750 Corporation Tax but pay employee's NI (£478) plus additional dividend tax (£303), totalling £781. You only save tax on this if you don't draw dividends.
Can i open a limited compqny just for buying and holding crypto?
Can a Uk Ltd pay salaries to Virtual assistant outside the UK? As they handle their business and salary of them are expense so how to manage that thing?
can you do a video how to pay taxes in UK as a (content creator, onlyfans, adult entertainer) and for businesses.
Why the £3470 is tax deductable?
I thought it should only be the £478 as it is going out before profit, but the £3470 isn't being paid out. Unless you are calculating it twice as part of the salary of £12570 which is tax deductable.
Exactly the comment I was looking for. That £3470 cannot be included here also unless you want to hype up the tax savings. The actual saving is only £470x19%
@@akashram228 Exactly. I wish he replies to clarify.
Although you end up paying 478 of NI on the difference between 12570 and 9100 you still end up better off overall. This is because both the salary of 12570 and the 478 of ni are deducted from taxable profits (therefore not paying Corp tax at 19% on either amount)
If you decided to just pay yourself 9100 rather than 12570 to avoid paying the NI you would pay CT of 19% on 3470 costing 659.30.
659.30 - 478 = 181.30 plus the 90.82 you save in CT on the allowable NI expense totals the 272.12 mentioned in the video.
Ultimately it depends if you can be arsed with the responsibility of paying your NI monthly/quarterly for the sake of 272 quid in tax savings a year. Most accountants would probably do this for you at no extra charge if they already prepare your accounts.
Would you not be saving on dividend tax too if you’re increasing salary - under the personal allowance - and, therefore, reducing dividend payments?
You say that corporation tax is payable against net profits. Surely corporation tax is payable against gross profits, which then creates the net profit surely?
do you have part 2 paying your self a dividend and the rates you can pay and the tax applied for 23/24
Im currently PAYE but im thinking of doing it as LTD Co on around 70k income. Do you think its worth going LTD or stay PAYE? can i reduce my tax enough to make it worthwhile?
Thanks for the video, useful to an extent but would be good if you could go further and explain how you pay yourself an additional salary - for example, if I had a ltd company that was generating £15k per month, and let's say I wanted to pull down £7k for personal use to cover all the bills etc, what would be the most tax efficient way of doing it?
You ensure your own property is a company asset with minimal rent against which tax deductible expenses may be written down. You ensure any personal expenditure is a tax deductible. And have a minimum of six months dividend payments on hand to cover personal expenses till the interim and annual dividends replenish that fund.
How do we live off this amount if our bills are higher then what we pay ourselves?
How many shares should you allocate your company upon registration as a single LLC which will not employ anyone?
100
a blind man is going to see where this is going If Labour come to power they will make dividend tax the same as income tax and Directors will be paid via salary its been too good for too long and this loophole will close we have already lost most of the tax free dividend allowance
Dividends are paid out of company profits that have been taxed. Salary is a tax deduction to the company, so no tax is paid by the company on this
Dividends are not tax free (and never have been), they have ALREADY been taxed. The current tax set up is where the govt is trying to equalise the overall tax paid between dividends and salary. But they cant recover the National insurance difference, so there is always going to be difference due to this.
Even Labour cant phuck around with dividends too much, as this will directly impact foreign investment into the UK (amongst other things)
Love the video. Would love for you to do an example like if the company makes say £150000 without accounting for any salary taken, what would be the figures for salary and dividends and frequency at which to take dividends
I would like to see this scenario too please
Great video as always but the £5000 employment allowance is based on two Employees not just two Director's. I'm sure I'm correct on this one?
Yes, you are correct
Thank you. This is amazing. I started two RUclips coachning niche channels and looking to register as a limited. I have been looking into the best way to run them as separate entities or as one business.
How many tax returns do you file?
I set up a limited company on 14th January 2021
• Filed a confirmation statement on 16th January 2022
• Filed dormant accounts on 31st October 2022
• Filed a confirmation statement on 12th January 2023
And I have had a couple failed to deliver tax return penalties.
I don’t understand??
Also worth noting that you can make up to 40k/year contribution to your pension that is also a valid business expense that is corporation tax deductible. This can really help if your profits are pushing you into higher tax bracket, just stick it in your pension instead directly from your Ltd company.
The annual allowance is now £60k, plus potential to use brought forward allowances. Pensions are great for tax but your company needs profits AND excess cash, which is the tricky part for a lot of small businesses.
If the director is non resident/citizen, will all the same rules apply??
How can one survive on £1,000 per month?
It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.
For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My hobby and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement.
It's unfortunate most people don't have such information. I don't really blame people who panic. Lack of information can be a big hurdle. I've been making more than $875k by just investing through an advisor, and I don't have to do much work. Doesn't matter if the economy is misbehaving; great wealth managers will always make returns.
@@hunter-bourke21 Interesting. I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.
“Camille Alicia Garcia” is the advisor that oversees my portfolio. She's an extremely intelligent person, very thoughtful, cautious and has an outstanding credentials. It's easy to find her on the web.
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
Would it be possible to include Scottish income tax rates as well as uk in your outlines? Excellent video which was very informative.
45% tax is crazy. Should be illegal
So you're not taking dividends?
It's criminal that the tax thresholds have been frozen for so long. Really need that high rate threshold to go up!
They do,
I'm 20 and on track to break into that higher rate pretty soon and it is quite infuriating!
They want the public to suffer inflation
Hi I’m new to the channel and have just watched your very informative video and subscribed. I’m looking at your back catalogue but can’t see anything on IR35. Would your recommended figures still apply, if caught by IR35, or do you have a different video on this?
If you are caught by IR35, then you dont get to divert the earnings to dividend, as you have to pay PAYE and NI on the Net earnings (after some allowable deductions) as if you have paid it all as salary
how do you survive on £13k a year?
Basic tax rate 20% Upto £37,700 Highertax rate40%From £37,701to £125,140 Additional tax rate45%Above £125,140 😢
We get taxed so bloody much
Basic tax
rate
20%
Upto £37,700
Highertax
rate
40%
From £37,701to
£125,140
Additional
tax rate
45%
Above £125,140
Unfortunately you are wrong about the 40% tax bracket
Hey thanks for this but you didn’t cover dividends!
Just take salary away from £50,270 and that’s your div
This video is amazing thank you! Could you possibly do one for 2024/2025? Given that April is rolling around this would be great!
Can someone be a sharehikder but not be a director?
How many people do u need to open a ltd company
I'm wondering how to pay myself a monthly salary of £5k - £10k a month as the owner of a UK business and legally pay the least amount of tax? Also, does the salary get paid out of the revenue or the net profit of the company? The salaries of my employees will be paid out of the revenue, but what about my salary? Am I entitled to choose exactly how much salary I get (assuming the business can afford it)? Does the salary get paid into my personal bank account, or should I set up another limited company business and bank account (separate from the business that I own) in order to pay my salary into? How is my salary taxed? There is about £2.2m in annual revenue and around £100k in profits per year in the company.
Hi Honest Money
Great video very informative
Note 1: NI payments will need to be made to the HMRC monthly/quarterly - Question ??
I pay my salary on an annual basis , once a year
we are setup for " Annual scheme " on RTI system all ok
Can I also pay my Employers Class1 NI once a year in March , when I submit my final FBS ?
What would be the best way to pay your self from your LTD company if you already have a full time job earning £100k (higher tax bracket).
Can you help me on the upcoming CT marginal rates, what happens if I have one company making 200k profit and another one that isn't even making a profit, are the thresholds now cut in half even though the second company makes no profit? Or is the CT marginal rates cumulative?
You need to look up 'associated companies tax' which is seeing a big change this year.
Sod that I'm moving to Monaco
Could you look at this again from the position of a sole director who is also drawing the full UK pension? I expect the salary / dividend ratio would change, maybe with no salary. But your analysis would be greatly appreciated.
This is incredibly helpful!
Awesome video. Thank you very much. I have set myself up as digital nomad so to speak and work from contract to contract from a converted van since August. Can I charge the conversion costs including the costs of the van to my business?
Thanks
What’s work for you?
Employment allowance????
Hi there
Very informative video.
Could you make an update for the following year 2024-2025 ?
New video for 24/25?
Very insightful! I’ve set up a ltd company and just started making revenue. I’m the only person in the business but confused as to which Ni figures are a business cost and which are a personal cost.
I.e, is employer Ni (£478) a business cost? Or is that the personal tax you would need to pay on the salary you’ve paid yourself (12570) when you do your self assessment?
And does the business have to pay 3470 in Ni to pay myself a 12570 salary? Or does the business just pay £478 in employer Ni? And if so, what personal Ni would I owe on the 12570 income?
If anyone can clarify that would much appreciated. And this is a great video! I just started speaking to accounts prior to watching this and they don’t go into anywhere near as much detail in terms of paying yourself! Thanks!
I think I am right in saying that once over pension age you do not pay National Insurance contributions as an employee, but does the employer contribution still have to be made?
not as far as I know
Employer NI contributions still have to be paid once an employee reaches state pension age.
@@peterdon-duncan7851 Thanks, much appreciated.
Do we have to sign up with HMRC or make any other compliance if we just pay director salary of 9100 pounds?
Since the company can claim the employment allowance of up to 5000, doesn't this mean that on a full salary of 12 570 there will be no employers NIC either?
Im going to be getting multiple salaries, from separate businesses one entity will be paying me from Europe, How can I minimize my tax? especially if they will be paying me in euros
Really helpful, thank you so much.
I’m looking into putting cash into a pension vs Lifetime ISA. I have a limited company and I’m the only director so how I’m keen to compare the cost of both to myself and the business. Do you have any advice on this?
How to pay yourself…not financial advice…make your mind up! The sooner we move to a cashless society the better.
This might be a stupid question, but.. we have a small business, my other half is a director of the business with me. We're looking to pay her a small salary but unsure on the literal mechanism to do so. Can we just bank transfer from the business account to her personal account? Any help would be appreciated, but we're waiting on confirmation from our accountant.
How will the state pension be paid for if we all stop paying NI?
Because by the time I get to retire anyway the pension age will be 75-80 so you won’t get one.. you’ll die before you reach it lol 😊
Can anyone explain how you set up NI payments monthly/quarterly? Gov website is 🤯😤
Thanks!
in my first year of trading, i did everything through my normal current account. i've mixed paying people, paying myself, shopping, other salaries and it's a mess. who can fix this for me? i was a bit stupid starting my business. i was refused business accounts when i applied. from april, i've successfully opened a business account and all should get well from here. but what do i do for the past year? can an accountant fix this for me?
Better than an accountant. . Very clear and easy to understand.