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TAX TIP TUESDAY: Should I increase my Director’s Salary for 17-18?

It’s Tuesday! Let’s talk Tax. Read this week’s short tax snippet for Doctors & Dentists, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – take 5 minutes to have a read.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

New tax year. New tax allowances

The new tax year commenced on 5 April, and it is typically the best time of year to revisit your tax planning.

This includes the standard salary attributed to company director’s as part of your remuneration package.

Salaries are set intentionally low, as it is more tax efficient to draw money from the company in the form of dividends.

Typically, the salary of a director will be set so it is exempt from tax and National Insurance, yet at a level that exceeds the lower earnings limit, which is currently £490 per month. This means you can still access benefits such as the state pension, in future years.

17-18 salary suggestion

In 16-17, company director salaries would likely be set around the £670 per month mark, to co-incide with the £11,000 personal tax-free allowance.

In 17-18, the personal allowance has increased to £11,500, therefore the salary could, technically increase to £680 per month, at no extra cost.

Often your accountant, if they take care of your payroll, will make small adjustments automatically. If you manage your own payroll though, this is something to consider, to maximise available allowances.

Of course, as with everything financial and tax related, it is important to discuss queries with your accountant and financial adviser, as they can use their expertise to advise you on your specific situation.

A specialist accountant can also help to ensure your tax planning for the year ahead is taken care of, so you save the most tax possible over all your income streams; salary, dividends, property, interest etc.

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