Company Directors can have a nominal salary put through their limited company on which no national insurance is due, and in many cases no tax is due, depending on their other sources of income.
This salary reduces the profits on which Corporation Tax is payable, meaning a reduction in the amount of corporation tax to pay.
This simple is often referred to as directors salary planning, tax efficient salary, personal allowance salary, minimum salary for directors etc.
In the 2012/13 tax year, the earnings threshold is set to £144 per week. This means that an individual can earn up to £144 per week, where no National Insurance or tax, depending on other income, is due. However, the individual still gets their stamp towards their state pension and are still able to receive SSP and other government benefits.
This equates to a monthly salary of £624 and therefore we should advising the majority of our director clients to take a monthly salary of £624, which equates to an annual salary of £7,488.
In many circumstances, in fact most circumstances, this will save corporation tax of £1,497.60 without costing a penny in tax and national insurance.
If you are using our payroll services, you will be automatically put onto the most tax efficient salary according to your own precise circumstances.
If you would like to know more information or would like to discuss using payroll service, please do not hesitate to me on 020 8543 1991.