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EddieM
Yes, all companies pay tax on their profits but I he pays himself a salary through the limited company, he’ll pay £6.7m in income tax PLUS £309k NI, PLUS the company will have a £2m+ NI bill. He'll end up with 'just' £6m in his pocket. You can rest assured he won’t be doing that.
If he pays himself in dividends through the limited company, he'll pay about £5.7m in dividend tax, **** all in income tax and no personal or company NI contributions (dividends are exempt from NI) and end up trousering £9.3m
It’s a little bit more involved than that and there’s lots more ways to minimise the total tax payable but you can see there’s a clear benefit for being paid in dividends rather than a salary and it’s all perfectly legal and above board. Most Ltd company directors pay themselves in dividends and not income.
It may have changed this year but here’s my calcs based on last years allowances/taxation rates.
View attachment 152963 View attachment 152964
Apart from the inconvenient fact, that you can't just pay yourself dividends unless you want to attract some serious unwanted HMRC attention.
Plus of course he *could* be IR35'ed.
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