Revisions to corporate tax regulations have added complexity to the discussion surrounding the most tax-effective compensation choices for company directors. Emma Clifton, Associate Business Advisory Partner looks at the traditional remuneration strategies when operating through a Limited Company and questions whether this is still the most tax-efficient method.

If you are trading as a Limited Company, you are likely to have previously had a conversation with your tax adviser about withdrawing funds in the most tax-efficient manner. Up until recently, you’ve probably been advised that the best option was to take a low salary with the balance taken as dividends.

If you take a salary up to the National Insurance threshold (currently £9,100) you will not pay any Income Tax or National Insurance, however, this will still count towards your National Insurance years. This means no extra tax payable to HM Revenue and Customs, but you will still be entitled to your full state pension upon retirement.

That all sounds great in principle but £758 per month will barely cover the average cost of a monthly mortgage payment, let alone be enough to support your family. Therefore, unless you have had a recent lottery win (lucky you!) then you will need to top this up and dividends can be an efficient way of doing this.

For further information read the full article on the Scrutton Bland website.