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Profit extraction in 2020/21 – What is the optimal salary?

2020-04-01T20:00:49+01:00April 15th, 2020|Categories: Blog, Limited Company, PAYE|Tags: , , , , , |

A popular tax-efficient profit extraction strategy used by personal and family companies is to take a small salary and extract further profits as dividends. Where this approach is adopted, the starting point is to determine the optimal salary. While this will depend on personal circumstances and there is no excuse for not doing the sums, there are some general guidelines. Where the director does not have the requisite 35 qualifying years to provide access to the full single tier state pension paying a salary at least equal to the lower earnings limit for Class 1 National Insurance purposes (set [...]

Family companies – optimal salary for 2019/20

2019-09-02T11:28:46+01:00June 25th, 2019|Categories: Articles & Guides, Blog, Limited Company, Taxation|Tags: , , , |

For personal and family companies it can be beneficial to extract some profits in the form of a salary. Where the individual does not have the 35 qualifying years necessary to qualify for the full single-tier state pension, paying a salary which is equal to or above the lower earnings limit for National Insurance purposes will ensure that the year is a qualifying year. New tax rates and allowances came into effect from 6 April 2019, applying for the 2019/20 tax year. These have an impact on the optimal salary calculation for family and personal companies. As in previous [...]