The conventional wisdom for many years has been to remunerate company owner managers by means of a small salary and the balance in dividends.
The salary was normally pitched at just below the primary threshold – £8.164 in 2017/18. This might mean that some personal allowance was used against dividends – but still cheaper even after taking corporation tax relief into account.
With the introduction of the dividend surcharge, the savings allowance and the savings nil band, it is now worth considering charging your company interest if you have a positive loan balance. This has the added benefit of making better use of the spare personal allowance.
The savings allowance is restricted for higher rate tax payers and eliminated for additional rate taxpayers but the savings nil band remains available at any income level provided non dividend income is below £5,000 after personal allowances.
If you would like to discuss your remuneration policy further please call Graham Buckell 01332 365855 grahamb@batesweston.co.uk