What should I pay myself as a director?

As a director of a limited company, you’re going to want to ensure that all areas of your business are running as efficiently as possible, from sales to your customer services, to your finances. Running your business as tax-efficiently as possible ensures that you’re not paying more than you need to when it comes to tax every year and this also means that you save more money that can be invested back into other areas of the business or for you to draw out from the money as dividends. Here are how you can ensure that your business is running at 100% efficiency when it comes to taxes:-

 

  • No matter what salary you’re paying yourself as a director, as you are a taxpayer in the UK you can take up to £2,000 in dividends tax-free each year so you must take advantage of this.

 

  • Claim back all expenses – there is a huge range of different expenses you can offset against your tax bill. Wherever you can claim an expense you should do so as this is saving you having to pay VAT on those specific products and/or services.

 

  • If you work from home there are a range of different expenses that can be claimed for if they relate to the running of your business, such as electricity and internet costs.

 

  • Claim on mileage expenses – this is especially important if you find that you’re travelling all over the country to see different clients and customers. At the moment you can claim 45p per mile back on your fuel for the first 10,000 miles and any additional miles covered after this you can claim 25p back.

 

  • Pay yourself a salary that is under the National Insurance threshold so that you won’t have to pay national insurance on tax on your salary. This salary tends to be small however you always have the options of taking money from the business through dividends. As of April 2020, this will change to £736.00 per month or £8,840.00 per year.

 

  • Share ownership of the company with your spouse, not having the whole ownership of yourself can reduce the amount of tax that your company is paying and can ensure that you stay out of the higher tax bracket. However, it’s usually beneficial for the spouse you’re sharing ownership with to have an active role within the business.

 

If you want to know more about how you can ensure that your business is running at maximum efficiency get in touch with a member of the team here at D&K Accounting. We’ll be able to sit down and take a look at your business and look at areas where you could be saving yourself and the business money.

 

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