My client is 57 yrs old with over 40 years NI contributions from continuous employment.
He is now a director of a one man company.
What benefits will he gain from paying a salary of £589 rather than taking all of his earnings as dividends.
Kind regards
Sheffield Accountant
Replies (2)
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benefits
Assuming he's got no other income, the £589pm will be tax-free and will reduce the company's taxable profit by £7,068, saving the company £1,413.60 in corporation tax.
The salary of £589 will ensure he's entitled to Statutory Sick Pay (and Statutory Paternity Pay!).
Personal Allowance
Because the 10% tax credit on dividends is not repayable to the taxpayer, you can only claim it against income on which there is a charge to tax. Effectively the client would lose their personal allowance if they did not transfer it to their company by means of taking a salary (unless they have other sources such as rental or interest at a sufficient level)