Spotlight on remuneration planning FIND OUR MORE FROM OUR HEALTHCARE TEAM
If you are a shareholder/director of an owner managed business, you could receive up to £19,570 tax free in the 2023/24 tax year and up to £20,570 tax free in 2022/23 if structured appropriately and depending on your circumstances and other income.
This can be achieved through a combination of low salary, high interest and dividends and could equate to tax free income of up to £41,140 for couples.
2023
A salary equivalent to the personal allowance i.e. £12,570 could also be considered for 2023/24 (£11,908 for 2022/23) if the company's employment allowance could be utilised such that no employer's NIC liability would arise.
Dividends The dividend rates for both 2022/23 and 2023/24 are:
Income
Dividend tax rate
£12,570 - £50,270
8.75%
£50,270 - £150,000
33.75%
>£150,000
39.35%
Salary The personal allowance is currently £12,570 and is expected to be frozen at this level until April 2026. An annual salary is often set below this amount, however, for directors at the threshold at which no employee’s or employer’s national insurance contributions (NIC) will be payable. A basic salary payment of £758 per month (£9,100 per annum) for 2023/24 as with 2022/23 will mean that NICs will not be payable by the director or employer, but the director will still receive credit towards their state pension for the relevant tax year.
www.hazlewoods.co.uk
Despite the health and social care levy being scrapped and NIC rates being adjusted back to their previous rates, no similar reduction has been announced for dividends. Furthermore, the current tax free dividend allowance of £2,000 is set to reduce to £1,000 from April 2023. Any additional dividends are taxed as the top-slice of income, so the tax bands that dividends fall within will be affected by other income; if income exceeds £100,000 the personal allowance is restricted by £1 for every £2 of income above £100,000.