In our opinion, there is still beneficial for a director/shareholder to take a dividend rather than an increase in salary. Under the new rules the amount of the tax saved will be less than before, but is still beneficial.
Company vs Partnership
The table below gives an indication of the 2016/17 tax savings that may be achievable for husband and wife who incorporate their business compare to being in a partnership.
| Profits | £30,000 | £50,000 | £100,000 |
| Tax and NI payable: | £ | £ | £ |
| As partners | 3,140 | 8,940 | 25,260 |
| As company | 2,775 | 7,619 | 20,617 |
| Potential saving | 365 | 1,321 | 4,643 |
The amount of the potential savings depends on the relevant circumstances of the couple’s tax position. So, they may be more or less than the above figures. The above examples are computed on the basis that the couple:
- share their profits equally
- have no other sources of income
- both partners/directors take a salary of £8,060 from the company with the rest (after tax) paid out as a dividend.
If your business is in Bromley, Kent and London areas, please contact us at Adiva Accountant in Bromley about the possible tax savings of trading as a company.
