Starting a new business? Get 40% off our accountancy services for 3 months! 😀

x

Taking a salary from your company can be a complex process and is much more complicated than if you are a sole trader or partner in a partnership. It is possible to be paid through your company with dividends as a shareholder or a salary as a director. It is common practice to take a combination of both. A lower rate of tax is paid on dividends, but there may be drawbacks to consider.

Every person is entitled to receive a personal allowance each year; this is a specified amount that isn’t taxable. For the year 2011-12, the amount you can earn without paying tax is £7475. Tax credits on dividends can’t be repaid, so you will waste your personal allowance if you take all your salary as dividends. A typical practice is to take a salary that only just covers your personal allowances, and take the rest of your salary as dividends.

Being paid a small salary and paying National Insurance will also preserve your entitlement to future state benefits, like the state pension. If your company is making a loss, you may still take a salary. However, you can only pay dividends if the company is making a profit. Taking a salary rather than dividends may also reduce the amount of Corporation Tax you pay, especially if your company doesn’t pay at the small company’s rate. Deciding how much salary to take from your company, and whether to take salary or dividends is a complex matter, and professional advice should be sought.

guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

June 2022 Client of the Month: Manea Kella

This month we spoke to Adrian Manea, architect and director at Manea Kella, a London based RIBA Chartered architecture and interior design…

Read More

Succession Planning for Business Owners: What Comes Next?

When you own a business, it’s extremely normal to feel like you’re surviving one day to the next – ‘winging it’, as…

Read More

The Accountancy Partnership – Our Positive Reviews

Here at The Accountancy Partnership, we’re proud of our customer reviews The reviews we receive from our customers show how hard we…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?

Yes
No

Call us on 020 3355 4047 if you’re not sure.