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Posted by Tax Innovations on 23 Feb 2018

Time for 2017/18 Company Remuneration Planning

Now that the deadline for submission of tax returns for the 2016/17 tax year has passed, it is time for this financial year’s company remuneration planning. You need to consider the level of salary and dividends you may require from your limited company in the 2017/18 tax year, as this needs to be in place by 5 April 2018.

Salaries or dividends that are decided on after 5 April 2018 will not fall within the 2017/18 tax year, meaning that you may lose the benefit of some of your 2017/18 tax allowances. Once 5 April 2018 has passed the opportunity will have gone – it will not be possible to backdate such payments so it is important that you act now. The decision to pay dividends or salary during the 2017/18 tax year must be made and recorded by 5 April 2018 to be effective.

There are several factors to be considered when making the decision about how much income to take from your limited company for the 2017/18 tax year. For example:

Do you have Other Income?

Income from other sources in the 2017/18 tax year will impact on how much income it is worth receiving from the company, as well as on the type of income that it is best to receive.

Do You Take Salary, Dividends or Both

Dividends generally have lower tax rates than salary payments, but the company receives tax relief for salaries that are not available for dividends. If you have no other income in the tax year a mix of salary and dividends is likely to be the best option, but other income will change the balance.

Do You Have an Overdrawn Loan Balance?

Directors may have a loan balance with the company – if a director owes the company and does not repay that debt within 9 months of the accounting year end, the company will pay a tax charge on this amount at 32.5%. HMRC will refund this tax after the loan is repaid, but it may be possible to clear the loan with salary or dividend without tax in 2017/18 if you act now.

These are just some of the major factors to consider when planning your 2017/18 remuneration strategy. Tax Innovations’ accountancy team works in tandem with our tax professionals to provide clients with an integrated service. We can help you to determine the optimum 2017/18 company remuneration strategy for you and your company – contact us now to discuss your needs.

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com

 

See also…

Tax Investigation Service for Limited Company and Directors

HMRC Guidance Wrong on Directors Tax Returns