Changes for 2018/2019 Tax Year
For the 2018/ 2019 tax year there is a small change to the national insurance limits, and the Dividend Allowance has reduced from £5,000 to £2,000.
Paying a Salary
Based on the new NI limits, from April 2018 you can pay a salary of £702 a month without paying any tax or NI.
However, if you do choose to pay a salary you will need to consider the following:
- You must be registered as an employer
- You have to file an real time information return each pay period
- No income tax or national insurance is due on a salary of up to £702 a month
- You will get National Insurance Credits towards some benefits eg. state pension
Dividends – from April 2018
Any dividends paid over £2,000 will attract dividend tax.
The rates of tax per person will be:
- First £2,000 of dividends – tax free
- 7.5 % for dividends falling within basic rate tax
- 32.5% for dividends falling within higher rate tax (over £46,350 from April 2018)
- 38.1% for dividends falling within the additional rate of tax with income over £100,000 meaning restrictions on your personal allowance
Dividend vs Salary Overview
In order to utilise HM Revenue & Customs tax free allowances for the 2018/19 tax year, the following basic rules apply:
- Pay yourself a salary of £8,424 for the 2018/19 tax year
- Distribute dividends of £5,426 to use up the remainder of your personal allowance
- £75 of tax will be payable per £1,000 of dividends from £5,427 up to total dividends of £37,926
- £325 of tax will be payable per £1,000 of dividends over £37,927.
Note – If your income exceeds £100,000 your personal allowance will be reduced and the above numbers will not apply.
Please feel free to call/email us for a free, no obligation quote for accounting services and advice for your Limited company – 07825 571471 email: staccount_tax@yahoo.com
Please note that the numbers given here is generic and may not be suitable for your circumstances. This post is for illustration purposes only and should not be relied upon for your tax planning or tax affairs.
