We offer a range of services including Personal Tax Planning, Corporate Tax Planning, International Tax Planning, Tax Reliefs, VAT & Customs Duty, and Wealth planning & Private Client. As a limited company director, you have the power to determine the amount you pay yourself to minimise your tax bill while maximising tax relief. Most directors choose to pay themselves a combination of salary and dividends to achieve this goal. However, the most tax-efficient way to structure your director's remuneration will depend on your company's number of directors and employees and your individual circumstances. 

To stay ahead of changes in tax thresholds and rates that will begin on April 6th, it is essential to act quickly. Our advice on how to pay yourself tax-efficiently in 2023/24 if you currently pay yourself a basic director's salary is as follows: 

If you're a director paying yourself a basic director's salary, we highly recommend that you increase your monthly salary to £1,047.50 per month (£12,570 per annum) for the new 2023/24 tax year. This is especially crucial for companies with one employee or director, as tax and employee national insurance thresholds have been equalized for the full tax year at £12,570. However, if your company has more than one employee or director on the payroll, the Employment Allowance will reduce the employer's national insurance charge to nil. 

Dividends for directors and shareholders will be tax-free up to £1,000 for 2023/24, and any dividends covered by the remaining unused personal allowance will also be tax-free. In the event that your total income exceeds £50,270, dividends will be taxable at 33.75% when they enter into the high-rate tax band. The £1,000 dividend allowance is not in addition to the basic rate band and needs to be taken into account when determining the rate of tax on your dividends. 

In case the above scenarios do not suit your personal needs, we recommend that you seek advice. Our team is always available for more help and advice on the optimum salary and dividend payments for 2023/24. 

Introduction:

As we near the end of 2023, the UK tax landscape continues to evolve, presenting new challenges and opportunities for businesses, self-employed individuals, and taxpayers. Staying updated on these changes is key to ensuring compliance and making the most of your financial planning. In this blog post, we explore the critical tax updates from December 2023, complete with examples and calculations, to give you a clearer picture of what these changes mean for you.

1. Record-High Tax Burden:

The UK's tax burden has reached its highest level since World War II, reflecting significant economic shifts and impacting tax planning strategies for both individuals and businesses.

2. Changes in National Insurance Contributions:

From January 2024, Class 1 employee NICs will be reduced from 12% to 10%, and Class 4 self-employed NICs will drop from 9% to 8% starting April 2024.

Example: An employee with an annual salary of £30,000 will see their NICs decrease from £2,700 to £2,250, resulting in an annual saving of £450.

3. Umbrella Company Guidance for Employment Businesses:

HMRC's latest guidance for employment businesses using umbrella companies aims to clarify legal responsibilities and protect against malpractice.

4. IR35 Off-Payroll Working Rules Update:

This change in policy regarding off-payroll working rules (IR35) allows HMRC to consider taxes already paid by workers or intermediaries when assessing deemed employers' tax liabilities.

Example: If an employer faces a £10,000 tax liability due to an IR35 error but the worker has already paid £4,000 in taxes, HMRC will now require only the remaining £6,000 from the employer.

5. Basis Period Reform for Sole Traders and Partners:

Changes to how profits are calculated for Income Tax for sole traders and partners are effective from the 2023 to 2024 tax year.

Example: A sole trader with a financial year ending on 30 June will now be taxed on the profit of that year plus the profit from 1 July 2023 to 5 April 2024, potentially increasing taxable income for the transitional year.

6. Cessation of HMRC Tax Clearance for Members' Voluntary Liquidations:

This immediate change affects the process for members’ voluntary liquidations, impacting both planning and execution.

7. Government’s Response to Customs Measures Consultations:

The UK government's steps to simplify customs processes can significantly benefit businesses engaged in international trade.

8. Further Action on Tax Repayment Agents:

HMRC is enhancing measures to protect taxpayers using repayment agents, ensuring greater security and transparency.

Consult Our Tax Professionals:

These updates illustrate the dynamic nature of the UK's tax system. Understanding how they affect your personal or business finances can be complex. We highly recommend consulting with one of our experienced tax professionals for personalized advice and strategies tailored to your unique situation. Our team is well-versed in the latest tax laws and committed to helping you navigate these changes efficiently.

Conclusion:

Keeping abreast of the latest tax changes is crucial for effective planning and compliance. For a deeper understanding and bespoke guidance, reach out to our tax experts. Stay tuned for more insights and updates on the UK tax landscape.